Reference no: EM132546088

A new chemical plant which was recently designed is being pitched to an investment ?rm. You have been tasked with generating the pro?tability report given the simulator data. After the engineering design was completed, it was determined that a total of $95 million in ?xed-capital investment was required to build this plant with $45 million used in the ?rst year and $40 million used in the second year of the two year construction period. Starting in year three, the plant is fully operational generating $38 million a year in revenue while requiring $12 million a year in operating costs. The equipment and facilities from the ?xed-capital investment depreciates with no salvage value over a ?ve year period (starting in year 3) and the corporation is taxed at 35%.

Question 1: If the plant is expected to operate for 12 years and the cost of capital is 10%, determine the:

(a) Net present value

(b) Discounted cash ?ow rate of return

(c) Payback period

(d) Return on investment

(e) Should this plant be built?