What is the net present value of facility

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Reference no: EM132042195

Part A

An ethanol processing facility costs $1000 to construct and will last for 20 years. It produces 100 units of ethanol a year for $5 per unit. If the interest rate is 10%, what is the net present value of this facility?

Part B

A different ethanol processing facility costs $10,000 to construct but instead will last forever. Every year (starting the year after construction), it produces 1000 units of ethanol at a price of $2 per unit. At what interest rate would an investor be indierent between constructing the facility and simply keeping the money? (The net present value would be equal to zero.)

Reference no: EM132042195

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