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In: Economics

U.S. Steel is considering a plant expansion to produce austenitic, precipitation hardened, duplex, and martensitic stainless...

U.S. Steel is considering a plant expansion to produce austenitic, precipitation hardened, duplex, and martensitic stainless steel round bars that is expected to cost $15 million now and another $10 million 1 year from now. If total operating costs will be $1.5 million per year starting 1 year from now, and the estimated salvage value of the plant is virtually zero, how much must the company make annually in years 1 through 8 to recover its investment plus a return of 16% per year?

The company must make $______ million annually in years 1 through 8 to recover its investment plus a return of 16% per year.

Solutions

Expert Solution

EUAC

= 15000000+10000000*(P/F,16%,1)+1500000*(P/A,16%,8)

= 15000000+10000000*0.862069+1500000*4.343591

= 15000000+8620689.66+6515386.34

= 30136076

= 30.13 million

Rahul Sunny answered 3 years ago
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