The manufacture of herbal health tonic is a competitive industry. The manufact

The manufacture of herbal health tonic is a competitive industry. The manufacturing facilities have an annual output of 100000 gallons. Operating costs are $2
per gallon. A 100000-gallon capacity plant costs $500000 to build and has an indefinite life with no salvage value. The cost of capital is 20% (assume no
taxes). Your company has discovered a new process that lowers the operating cost per gallon to $1.50. Assuming that the competition will never catch up and the
market demand is sufficiently high what is the net present value of building a new plant with new technology?