Langley Inc

question 6

Essay

Langley Inc. has just invested $600,000 in a manufacturing process that is estimated to generate an after-tax
annual cash flow of $280,000 in each of the next five years. At the end of year five, the firm does not expect any
further market for the product and any appreciable salvage value for the manufacturing process. If a
manufacturing problem delays plant start-up for one year (leaving only four years of process life), what
additional after-tax cash flow will be needed to maintain the same internal rate of return as if no delay had
occurred?

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Definitions:

Closure

The psychological process of seeking resolution or conclusion to an unfinished or traumatic event or experience.

Proximity

The physical or psychological closeness between people, objects, or ideas, often influencing relationships and interactions.

Moon Illusion

The optical illusion where the Moon appears larger when it is close to the horizon than when it is high in the sky.

Horizon

The line at which the earth's surface and the sky appear to meet, or the limit of one's knowledge, experience, or interest.