An infrastructure project has a timeline of 15 years and starts on the first day of the coming month. Recurring expense payments start from the beginning of the project at a rate of $12 million per annum payable monthly in advance for the first 2 years. There is also a one-time expense of $1.6 million to be paid at the beginning of the contract. 2 years after the project starts, an income stream of $8 million per annum payable half-yearly in arrears will be received for the rest of the project. a. Calculate the net present value of the project using an effective annual interest rate of 8%. b. Calculate the discounted payback period (expressed in units of years) of the project using an effective annual interest rate of 7%.

An infrastructure project has a timeline of 15 years and starts on the first day of the coming month. Recurring expense payments start from the beginning of the project at a rate of $12 million per annum payable monthly in advance for the first 2 years. There is also a one-time expense of $1.6 million to be paid at the beginning of the contract. 2 years after the project starts, an income stream of $8 million per annum payable half-yearly in arrears will be received for the rest of the project. a. Calculate the net present value of the project using an effective annual interest rate of 8%. b. Calculate the discounted payback period (expressed in units of years) of the project using an effective annual interest rate of 7%.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter19: Lease And Intermediate-term Financing

Section: Chapter Questions

Problem 17P

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