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.)
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.)
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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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.)
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