Breakeven cash inflows and risk Blair Gases and Chemicals is asupplier of highly purified gases to semiconductor manufacturers. Alarge chip producer has asked Blair to build a new gas productionfacility close to an existing semiconductor plant. Once the new gasplant is in place, Blair will be the exclusive supplier for thatsemiconductor fabrication plant for the subsequent 5 years. Blairis considering one of two plant designs. The first is Blair’s”standard” plant which will cost $30million to build. The secondis for a “custom” plant which will cost $ 40million to build. Thecustom plant will allow Blair to produce the highly specializedgases that are required for an emergency semiconductormanufacturing process. Blair estimates that its client will order10.0 million of product per year if the traditional plant isconstructed, but if the customized design is put in place, Blairexpects to sell $ 15.0 million worth of product annually to itsclient. Blair has enough money to build either type of plant, and,in the absence of risk differences, accepts the project with thehighest NPV. The cost of capital is 12.0%. a. Find the NPV foreach project. Are the projects acceptable? b. Find the breakevencash inflow for each project. c. The firm has estimated theprobabilities of achieving various ranges of cash inflows for thetwo projects, as shown in the table LOADING… . What is theprobability that each project will achieve the breakeven cashinflow found in part (b)? d. Which project is more risky? Whichproject has the potentially higher NPV? Discuss the risk-returntrade-offs of the two projects. e. If the firm wished to minimizelosses (that is, NPV . . .
https://writerbay.net/wp-content/uploads/2019/11/logo-300x86.png 0 0 Paul https://writerbay.net/wp-content/uploads/2019/11/logo-300x86.png Paul2021-09-08 02:29:552021-09-08 02:29:55Breakeven cash inflows and risk Blair Gases and Chemicals is asupplier of highly purified gases to s