Corporate Finance
3rd Edition
ISBN: 9780132992473
Author: Jonathan Berk, Peter DeMarzo
Publisher: Prentice Hall
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Textbook Question
Chapter 3, Problem 9P
You run a construction firm. You have just won a contract to construct a government office building. It will take one year to construct it, requiring an investment of $10 million today and $5 mi lion in one year. The government will pay you $20 million upon the building’s completion. Suppose the cash flows and their times of payment are certain, and the risk-free interest rate is 10%.
- a. What is the
NPV of this opportunity? - b. How can your firm turn this NPV into cash today?
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You run a construction firm. You have just won a contract to build a government office building. Building it will take one year and require an investment of $9.78 million today and $5 million in one year. The government will pay you $22.5 million upon the building's completion. Suppose the cash flows and their times of payment are certain, and the risk-free interest rate is 10%.
What is the NPV of this opportunity?
You run a construction firm. You have just won a contract to build a government office building. Building it will require an investment of $10 million today, and $5 million in one year. The government will pay you $20 million in one year upon completion. Suppose the cash flows and their time are certain, and the interest rate is 10%. What is the NPV of this opportunity?
You run a construction firm. You have just won a contract to build a government office building. It will take one year to construct it requiring an investment of $9.32 million today and $5.00million in one year. The government will pay you $20.50 million upon the building's completion. Suppose the cash flows and their times of payment are certain, and the risk-free interest rate is12%.
What is the NPV of this opportunity? (Round to two decimalplaces.)
How can your firm turn this NPV into cash today? (Round to two decimalplaces.)
Chapter 3 Solutions
Corporate Finance
Ch. 3.1 - Prob. 1CCCh. 3.1 - If crude oil trades in a competitive market, would...Ch. 3.2 - How do you compare costs at different points in...Ch. 3.2 - Prob. 2CCCh. 3.3 - What is the NPV decision rule?Ch. 3.3 - Why doesnt the NPV decision rule depend on the...Ch. 3.4 - Prob. 1CCCh. 3.4 - Prob. 2CCCh. 3.5 - If a firm makes an investment that has a positive...Ch. 3.5 - Prob. 2CC
Ch. 3.5 - Prob. 3CCCh. 3.A - The table here shows the no-arbitrage prices of...Ch. 3.A - Suppose security Chas a payoff of 600 when the...Ch. 3.A - Prob. A.3PCh. 3.A - Prob. A.4PCh. 3.A - Prob. A.5PCh. 3.A - Consider a portfolio of two securities: one share...Ch. 3.A2 - Why does the expected return of a risky security...Ch. 3.A2 - Prob. 2CCCh. 3.A3 - Prob. 1CCCh. 3.A3 - Prob. 2CCCh. 3 - Honda Motor Company is considering offering a 2000...Ch. 3 - You are an international shrimp trader. A food...Ch. 3 - Prob. 3PCh. 3 - Prob. 4PCh. 3 - You have decided to take your daughter skiing in...Ch. 3 - Suppose the risk-free interest rate is 4%. a....Ch. 3 - You have an investment opportunity in Japan. It...Ch. 3 - Your firm has a risk-free investment opportunity...Ch. 3 - You run a construction firm. You have just won a...Ch. 3 - Your firm has identified three potential...Ch. 3 - Your computer manufacturing firm must purchase...Ch. 3 - Prob. 12PCh. 3 - Prob. 13PCh. 3 - Prob. 14PCh. 3 - Prob. 15PCh. 3 - An Exchange-Traded Fund (ETF) is a security that...Ch. 3 - Consider two securities that pay risk-free cash...Ch. 3 - Prob. 18P
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