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Determine the maximum deviation allowable

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Reference no: EM132525200

You are considering opening a new plant. The plant will cost $100.1 million up front and will take one year to build. After that it is expected to produce profits of $29.3 milion at the end of every year of production. The cash flows are expected to last forever. Calculate the NPV of this investment opportunity if your cost of capital is 7.7%. Should you make the investment? Calculate the IRR and use it to determine the maximum deviation allowable in the cost of capital estimates to leave the decision unchanged.

The NPV of the project will be $.......

The IRR is .........%

The maximum deviation allowable in the cost of capital estimates is ..............%

Reference no: EM132525200

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