Finding PV of Cash Flows for a an Aging Factory Reliable Assignment Help

  

Question Description

A company is building a fuel efficient power plant which will generate
its first annual cash flow of $18m exactly 4 years from today. As it
ages, the volume it produces will remain constant but competing new
technologies will drive prices down further. Hence the cash flows it
creates will decline by 1% per year. Exactly 45 years from today, this
plant will be scrapped, and the Environmental Protection Agency will
require m expenditures to dismantle and clean it up. The plant’s OCC
is 8%. What is the highest price that a buyer should consider paying for
it?

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