A proposed 25 million investment at a 70 mgy million, Ask an Expert

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A proposed $2.5 million investment at a 70 MGY (million gallons per year) facility will save the facility $1.1 million/ year in energy costs. The equipment needs maintenance every 3 years (year 3, 6, 9), costing $300,000 and the equipment has a useful life of 11 years. Assuming an interest rate of 9.5%/ yr, should the plant make this investment? Why or why not?

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