The Manufacture of Folic Acid Is a Competitive Business $$43,300; and Year 3: +$58,300

Multiple Choice

The manufacture of folic acid is a competitive business. A new plant costs $100,000 and lasts for three years. The cash flow from the plant is as follows: year 1: +$43,300; year 2: + $$43,300; and year 3: +$58,300. (Assume no taxes.) If the discount rate is 20 percent, what is the value of the plant at the end of year 2? Round to the nearest $100.

A) $48,600
B) $38,520
C) -$51,600
D) Zero