3) An investment project requires 1 200 000 TL initial cost. The economic life of the projectis 5 years and at the end of the 5th year, there is a salvage value of 350 000 TL. The expectedfuture cash flows are estimated as follows:1. year 350 000 TL, 2. year: 500 000 TL, 3. year 700 000 TL, 4. year 850 000 TL,5 year300 000 TLFind the NPV (net present value) of the project. Is this a feasible project if there is a riskpremium of %8. The benchmark government bond is trading at %18.

Given information : Year Cash flows 0 1200000 1 350000 2 500000 3 700000 4 850000 5…

Answered: at the end of the 5th year, there is a…

Business

Finance

at the end of the 5th year, there is a salv ows are estimated as follows: D00 TL, 2. year. 500 000 TL, 3. year: 700

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 21P

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Question

3) An investment project requires 1 200 000 TL initial cost. The economic life of the project
is 5 years and at the end of the 5th year, there is a salvage value of 350 000 TL. The expected
future cash flows are estimated as follows:
1. year 350 000 TL, 2. year: 500 000 TL, 3. year 700 000 TL, 4. year 850 000 TL,5 year
300 000 TL
Find the NPV (net present value) of the project. Is this a feasible project if there is a risk
premium of %8. The benchmark government bond is trading at %18.

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