What is the most pessimistic value for the annual cost

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Reference no: EM13771043

A company planning to borrow $9.0 million for a plant expansion is not sure what the interest rate will be when it applies for the loan. The rate could be as low as 8% per year or as high as 10.2% per year. The company will move forward with the project only if the annual worth of the expansion is below $5.2 million. The maintenance and operating cost is fixed at $3.3 million per year and the salvage will be $3.4 million. Use a 5-year study period.

What is the most optimistic value for the annual cost?

What is the most pessimistic value for the annual cost?

Is the decision sensitive to interest rate?

-Yes

-No

Reference no: EM13771043

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