A factory cost $93,000 to purchase. You believe ("certain") that it will produce a cash inflow, net of all the costs, of $10,000 a year at the end of each of each of the next 3 years and then is sold for $100,000, immediately after it returns its last cash inflow of $10,000. The opportunity cost of capital is 10 percent.
a. What is the net present value of the factory? Show work.
b. What will this factory be worth at the end of 2 years? (In other words, how much would you pay for it at year-end 2 if the applicable cost of opportunity was 10%?) Show work.