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What is the payback period of investment

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Reference no: EM133116969

You are considering opening a new plant. The plant is expected to cost $8.9 million upfront and take a year to make. After that, it is expected to make $3.9 million in the first year after it is opened and $2.1 million for the following four years.

Required:

  1. Draw the timeline
  2. What is the payback period of this investment?
  3. If you require a payback period of three years, will you open the new plant?
  4. What is the NPV of the movie if the cost of capital is 7.5%? Should you open the new plant given its NPV?

Reference no: EM133116969

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