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Should build the factory or leave the money in the bank

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Reference no: EM132524152

Question 1: You are trying to decide if you should build a factory or simply leave the money in the bank collecting interest. It will cost $10M to build the factory and two years of time. Assume the factory will run for 25 years after that and generate $1.5M per year in profit each year. Assume a discount rate of 4%. Also assume that all of the $10M building costs are spent on day-one of construction. Should you build the factory or leave the money in the bank at a 3% interest rate?

Reference no: EM132524152

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