You are hired as a consultant for a client considering the following 4-year BIOTECH project X:

Initial Capital Spending (paid at T=0): an asset worth $100 mil

The asset will have no book value and will be completely worthless at the end of project's life

Initial investment in Net Working Capital (paid at T=0): $8 million. NWC levels are supposed to increase by $1 mil per year.

The project will generate Operating Cash Flows OCF=$30 mil per year, for every year from Year 1 to Year 4.

The cost of capital for the project is 16%.

What is the NPV of such a project? Should your client accept it? Why or why not?

Answer rating: 100% (QA)

Answer Calculation of NPV and Investment Decision To calculate the net present value NPV of the BIOT... View the full answer