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In: Finance
3M is evaluating a new type of adhesive. The initial investment required is $1,312 million. The...
3M is evaluating a new type of adhesive. The initial investment required is $1,312 million. The company expects to sell 63 million units every year forever, at a net cash flow of $2.83 per unit. Investments with similar risk deliver a rate of return of 14%.
a. What is the NPV of the project (in $ million)?
b. In fact, there is a 50% chance that annual sales will hit 94.5 million units and a 50% chance that they will be 31.5 million units. The project assets can be sold for $1,050 million (after taxes) in year 1. What is the expected NPV of the project if the company can abandon or expand the project after one year (in $ million)?
Solutions
jeff jeffy answered 2 years agoRelated Solutions
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