Adnrew is evaluating the feasibility of purchasing a factory. He will have to make an upfront...

Adnrew is evaluating the feasibility of purchasing a factory. He will have to make an upfront payment of $1,470,000. He will then need to invest $900,000 one year from now and $950,000 two years from now to upgrade and expand the facilities. The factory is expected to generate net returns of $380,000 from the second year onwards. He plans to sell the factory at the end of eight years for $4,000,000. His required rate of return is 15%. Using the net present value (NPV) criterion, determine if he should accept or reject this project.

Expert Solution

Solution:-

To Calculate NPV of the Project-

NPV of the Project is accepted when it is greater than or equal to zero. Here, NPV of the Project is Negative. Hence, Project shoudl be rejected.

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jeff jeffy answered 2 years ago

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