The following project takes place over a 20 year period of time. Suppose that an electric motor factory will take a year to build: $5 million is spent right away, and another $5 million is spent at the end of the first year. Also, suppose the factory is expected to lose $2.0 million at the end of year two and $1.0 million at the end of year three. At the end of each of the years, four through 20, it will earn $1.02 million, when it will be scrapped for $2.0 million at the end of year 20. a. What is the NPV if the discount rate is 5%?
The following project takes place over a 20 year period of time. Suppose that an electric motor factory will take a year to build: $5 million is spent right away, and another $5 million is spent at the end of the first year. Also, suppose the factory is expected to lose $2.0 million at the end of year two and $1.0 million at the end of year three. At the end of each of the years, four through 20, it will earn $1.02 million, when it will be scrapped for $2.0 million at the end of year 20. a. What is the NPV if the discount rate is 5%?
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
Problem 1PS
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The following project takes place over a 20 year period of time.
Suppose that an electric motor factory will take a year to build: $5 million is spent right away, and another $5 million is spent at the end of the first year. Also, suppose the factory is expected to lose $2.0 million at the end of year two and $1.0 million at the end of year three. At the end of each of the years, four through 20, it will earn $1.02 million, when it will be scrapped for $2.0 million at the end of year 20.
a. What is the NPV if the discount rate is 5%?
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