A manufacturing company based in a developing country is considering opening a new plant

A manufacturing company based in a developing country is considering opening a new plant.

The investment required to build the factory and buy the equipment is $5 million.

The firm estimates that the operating activities conducted in the new plant will generate a profit of

$100,000 in each of the next four years.

At the end of the fourth year, the plant will be sold to a multinational company for $7.5 million.

The project is estimated to have the same level of risk as an investment in the local stock market, which

offers an expected annual rate of return of 15%.

Calculate present value.

Would you advise the company to undertake the project? Explain.