Griffith Motors is planning to open a new factory. The initial
outlay of this project is 70 million AUD, and the company expects
the factory to earn revenues of 80 million AUD in Year 1, 90
million AUD in Year 2. The operating costs are expected to be 40
million AUD each year. The company is planning to sell the factory
at the end of Year 2 and the company is expecting the salvage value
of the project is 15 million AUD. If the project’s discount rate is
7%, should the company go ahead with the project (hint: NPV).
Provide all the workings and justify your answer (use up to 3
decimal places).
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