A construction company that serves a 20-county area of eastern Georgia has as its main source of revenue the manufacture and placement of asphaltic concrete used in road construction. Thanks to a new, multiyear, state-funded highway program, the company is considering the purchase of a new nonportable drum-mix plant needed to expand its asphaltic-concrete manufacturing capacity. Students can explore net present value (NPV), payback, profitability index (the ratio of the present value of future cash flows divided by the initial investment), and internal rate of return (IRR) in deciding whether or not the purchase is attractive. See also the B case (UVA-QA-0665).
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