a) The electric power company Nucular & Co considers to build a new nuclear power plant....
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a) The electric power company Nucular & Co considers to build a new nuclear power plant. The initial investment for this project is $5.2 billion. The firm expects the power plant to run for 20 years and to produce yearly cash flows of $550 million over that period. At the end of those 20 years, the power plant must be decommissioned at a cost of $1.2 billion. However, the firm has an agreement with the government to resell the land for $100 million at the end of that 20 year period. 4 Calculate the NPV of that project, given a discount rate of 6% and state if you would undertake that project. b) Think-Link develops an innovative app that costs them $10 million and generates a yearly cash flow of $400,000 forever. Calculate and interpret the IRR of that project. (2 points) a) The electric power company Nucular & Co considers to build a new nuclear power plant. The initial investment for this project is $5.2 billion. The firm expects the power plant to run for 20 years and to produce yearly cash flows of $550 million over that period. At the end of those 20 years, the power plant must be decommissioned at a cost of $1.2 billion. However, the firm has an agreement with the government to resell the land for $100 million at the end of that 20 year period. 4 Calculate the NPV of that project, given a discount rate of 6% and state if you would undertake that project. b) Think-Link develops an innovative app that costs them $10 million and generates a yearly cash flow of $400,000 forever. Calculate and interpret the IRR of that project. (2 points)
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a To calculate the NPV of the project we need to take into account the initial investment the yearly ... View the full answer
Related Book For
Contemporary Financial Management
ISBN: 9780324289114
10th Edition
Authors: James R Mcguigan, R Charles Moyer, William J Kretlow
Posted Date:
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