Question
In: Finance
A company is in the process of constructing a new plant at a cost of $16...
A company is in the process of constructing a new plant at a cost of $16 million. It expects the project to generate cash flows of $9 million, $6 million, and $11 million over the next three years. The cost of capital is 18.9 percent p.a. What is the net present value of this project? (in millions to three decimals)
Solutions
Expert Solution
| Year | Cash Flow | PV Factor | PV Of Cash Flow |
| a | b | c=1/1.189^a | d=b*c |
| 0 | $ -16 | 1.00000 | $ -16.000 |
| 1 | $ 9 | 0.84104 | $ 7.569 |
| 2 | $ 6 | 0.70735 | $ 4.244 |
| 3 | $ 11 | 0.59491 | $ 6.544 |
| Net Present value | $ 2.358 | ||
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