Question: You have been asked to analyze the net present value of building a toll road in Asia. You estimate that building the road will cost

You have been asked to analyze the net present value of building a toll road in Asia. You estimate that building the road will cost you $50 million up front and that you will generate $ 4 million in cash flows next year and that these cash flows will grow 10% a year for the following four years (Years 2-5). After year 5, you expect the cash flows to continue to grow at the inflation rate (2%). Assuming a cost of capital of 8%, what is the NPV of this project to you?

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!