PART B From Part A above, assume that the bank decided to give a loan of $ 59 million to Nivea Corporation (recorded for initial year). Nivea-Corporation invested the amount in a project and generated the following sequence of cash flows over six years:YearCash Flow ($ million)0-59.0014.0025.0036.0047.3358.0068.251.Calculate the terminal value assuming that cash flows after the sixth year grow at 2% annually in perpetuity, and then recalculate the NPV use an interest rate of 10%

Net present value (NPV) is the difference between the present values of cash inflows and cash…

Answered: From Part A above, assume that the bank…

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter12: Capital Investment Analysis

Section: Chapter Questions

Problem 16E

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PART B

From Part A above, assume that the bank decided to give a loan of $ 59 million to Nivea Corporation (recorded for initial year). Nivea-Corporation invested the amount in a project and generated the following sequence of cash flows over six years:

Year	Cash Flow ($ million)
0	-59.00
1	4.00
2	5.00
3	6.00
4	7.33
5	8.00
6	8.25

1.Calculate the terminal value assuming that cash flows after the sixth year grow at 2% annually in perpetuity, and then recalculate the NPV use an interest rate of 10%

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