Small food processing plant that currently generates revenue

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Reference no: EM132003269

You own a small food processing plant that currently generates revenues of $2 million per year. Next year, based upon a decision by the local school system, your revenues will either increase by 34% or decrease by 36%, with equal probability, and stay at that level as long as you operate the plant. Other costs run $1.6 million dollars per year. You can sell the plant at any time to a large conglomerate for $5 million and your cost of capital is 10%.

What is the value of your plant (do not include the time 0 cash flow)? Round your answer to the second decimal place (e.g., 10.25 million).

Reference no: EM132003269

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