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The XYZ Company is performing capital budgeting to decide whether to build a factory to produce...

The XYZ Company is performing capital budgeting to decide whether to build a factory to produce bicycles.

The factory will cost $1 million at time 0 and $1 million at time 1.

It will result in positive cash flows of:

Time Amount
2 100,000
3 200,000
4 300,000
5 400,000
6 500,000

The factory will be sold at time 6.

The opportunity cost of capital is 4% effective.

Find the minimum sale price at time 6 to make the factory a desirable investment.

Solutions

Expert Solution

Minimum Selling Price for the factory will be the one at which the NPV of cash flows is equal to zero. Using Goal Seek function in excel.

The Minimum selling Price is $ 899,533.26.

Formulae

jeff jeffy answered 2 years ago
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