A project is expected to cost $4 million today and generate a net after-tax cash flow of $600,000 at the end of year 1 and $500,000 at the end of year 2. The net cash flows from year 2 onwards are expected to grow at 6% per annum forever. If the project’s discount rate is 12%, calculate the net present value of the project. Show all calculations.
A project is expected to cost $4 million today and generate a net after-tax cash flow of $600,000 at the end of year 1 and $500,000 at the end of year 2. The net cash flows from year 2 onwards are expected to grow at 6% per annum forever. If the project’s discount rate is 12%, calculate the net present value of the project. Show all calculations.
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter12: Capital Budgeting: Decision Criteria
Section: Chapter Questions
Problem 1P: A project has an initial cost of 40,000, expected net cash inflows of 9,000 per year for 7 years,...
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A project is expected to cost $4 million today and generate a net after-tax cash flow of $600,000 at the end of year 1 and $500,000 at the end of year 2. The net cash flows from year 2 onwards are expected to grow at 6% per annum forever. If the project’s discount rate is 12%, calculate the
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