A certain project requires an immediate cash outflow of $4 million. At the end of each of the next four years, the investment will generate cash inflows of $1.5 million. That is at the end of each years, 1st, 2nd, 3rd and 4th year cash inflows is $1.5 million. Inflation rate is expected to be 5% per year during the next four year period. Assuming the cash flows are in nominal terms, what will be the project's NPV is you required 5% realrateof return?
A certain project requires an immediate cash outflow of $4 million. At the end of each of the next four years, the investment will generate cash inflows of $1.5 million. That is at the end of each years, 1st, 2nd, 3rd and 4th year cash inflows is $1.5 million. Inflation rate is expected to be 5% per year during the next four year period. Assuming the cash flows are in nominal terms, what will be the project's NPV is you required 5% realrateof return?
Chapter10: Capital Budgeting: Decision Criteria And Real Option
Section: Chapter Questions
Problem 16P
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A certain project requires an immediate
Inflation rate is expected to be 5% per year during the next four year period.
Assuming the cash flows are in nominal terms, what will be the project's NPV is you required 5% realrateof return?
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