Kimchi Corporation is thinking about introducing a new surface cleaning machine. The finance department has come up with the following annual after-tax operating cash flows estimation: 50% probability of $3.05 million per year and 50% probability of $6.1 million per year for the next 5 years. Initial cost of investment is around $15 million and a 16% discount rate should be used. i) Calculate the NPV of the project based on the above information.

Kimchi Corporation is thinking about introducing a new surface cleaning machine. The finance department has come up with the following annual after-tax operating cash flows estimation: 50% probability of $3.05 million per year and 50% probability of $6.1 million per year for the next 5 years. Initial cost of investment is around $15 million and a 16% discount rate should be used. i) Calculate the NPV of the project based on the above information.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 4P

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