*250,000-250,000*30%=175,000

Conclusion:

Based on the previous analysis, we can see that the Net Present Value for this project is positive,
meaning that the project is bringing value to the shareholders and that it would be beneficial to the
firm. However, we also computed the profitability index and it does not seem to be so high, so the
CEO might be extremely careful when making his decision. A positive NPV value shows that a
project is profitable, but does not ensure that this specific project is the best option.

Even though we have already included the opportunity cost in our analysis, it would still be
interesting to conduct further analyses as to what the CEO’s alternatives are. He has an offer for
the purchase of both the land and the plant for 1.5 million dollars despite previously having
estimated them at 600,000 dollars, meaning that the potential benefit might be greater than
expected. As we do not have any information about the market, we can not know if the new offer is
particularly high or the estimation especially low, and we can not know what its real value will be
after the 5-year-duration of the project, but it remains that a deeper market analysis should be
conducted. In addition to this, we do not know anything about the other projects the firm could
decide to conduct, yet their NPVs.

Therefore, we strongly recommend him to search for more alternative options. We did think about
a few options which are:
- Renting the plant to another company instead of using it or selling it;
- Selling the plant for 1.5 million dollars and financing other projects with this new capital
available. To do such a thing, he would need to search for both internally available projects and
investments on the financial markets and compute the associated NPVs. We can not compute them
here as we do not have the required information, but he should definitely spend some time doing;
- Bid for other production projects for other companies, which might be more profitable, require
less investment or have higher selling prices.

Last and not least, we must also consider that the company is bidding for a project. For the sake of
the calculations, it has been assumed that he would win the tender with his offer, but it is not
certain that he will in reality. He might lose this project, or be forced to lower the selling price
during negotiations in order to win the project, making the benefits - and the NPV - lower. As well,
there is no guarantee that if he loses the bid the offer for the purchasing of the land and the plant
would still be available at that time.

In conclusion, we can not really make a strict recommendation to the CEO as to which behavior he
should adopt. The uncertainty can not really be completely assessed in this case, though it could be
diminished thanks to further research and analysis.