Suppose you are interested in exclusive rights to a new product that will allow easy access to the Internet everywhere. If you get the rights to this product, you consider that the establishment of the infrastructure of this service is around $50 million. Based on your projections, you believe the service will generate a CF, after taxes, of $10 million per year. In addition, you expect to exploit this niche, without serious competition, during the first five years. Consider a rate 15% discount. Calculate the NPV of the project The greatest uncertainty of this project concerns the number of people likely to to be interested in this product. Although market research indicates that this product only interests a small number of salespeople, they also specify the existence of a potential market in the years to come. After some simulations, the standard deviation of the anticipated present value of the project's CF is 42%. The no rate risk is 5% Evaluate the value of the delay option (exclusive rights)

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