Suppose you work at an organic milk company, your boss asked you to evaluate a project with an infinite life. Sales and costs project to $1,200 and $650 per year, respectively. (Assume sales and costs occur at the end of the year [i.e., profit of $600 at the end of year one]). There is no depreciation and the tax rate is 21 percent. The real required rate of return is 10 percent. The inflation rate is 4 percent and is expected to be 4.3 percent forever. Sales and costs will increase at the rate of inflation. If the project costs $3,000, what is the NPV?

 

Answer rating: 100% (QA)

To calculate the Net Present Value NPV of the project we need to discount the future cash flows to t... View the full answer