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A manufacturing company is thinking about building a new factory. The new factory, if built, will give a return of $200 million in 4 years, and it would cost $125 million today to build. The company will decide to build the factory if the interest rate is

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Zviko

Answer:

The company will decide to build the factory if the interest rate is 12.47 %.

Explanation:

The required interest rate r, can be determined as follows ;

PV = - $125 million

n = 4

Pmt = $0

P/yr = 1

FV = $200 million

r = ?

Using a Financial Calculator, the required interest rate r, is 12.4683 or 12.47 % (2 decimal places)

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