10. The cash flows of a project which requires an immediate investment of $80, 500 is given below: Year 1 2,000 Year 2 6,500 Year 3 7, 200 Year 4 7,800 Given the discount rate is 8% and the free cash flow is expected to grow at an annual rate of 3% after the fourth year. What are the NPV of the project and the year 4 terminal value? a) 56, 478; 156, 000 b) 56, 478; 160, 680 c) -61, 627; 156, 000 d) -61, 627; 160, 680
10. The cash flows of a project which requires an immediate investment of $80, 500 is given below: Year 1 2,000 Year 2 6,500 Year 3 7, 200 Year 4 7,800 Given the discount rate is 8% and the free cash flow is expected to grow at an annual rate of 3% after the fourth year. What are the NPV of the project and the year 4 terminal value? a) 56, 478; 156, 000 b) 56, 478; 160, 680 c) -61, 627; 156, 000 d) -61, 627; 160, 680
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Transcribed Image Text:10. The cash flows of a project which requires an immediate investment of $80, 500
is given below:
Year 1
2,000
Year 2
6, 500
Year 3
7, 200
Year 4
7,800
Given the discount rate is 8% and the free cash flow is expected to grow at
an annual rate of 3% after the fourth year. What are the NPV of the project
and the year 4 terminal value?
a) 56, 478; 156, 000
b) 56, 478; 160, 680
c) -61, 627;
156, 000
d) -61, 627; 160, 680
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