You run a construction firm. You have just won a contract to build a government office complex. Building it will require...
You run a construction firm. You have just won a contract to build a government office complex. Building it will require an investment of $9.5 million today and $5.3 million in one year. The government will pay you $20.5 million in one year upon the building's completion. Suppose the interest rate is 10.7%.
a. What is the NPV of this opportunity?
b. How can your firm turn this NPV into cash today?
a. What is the NPV of this opportunity?
The NPV of the proposal is? million. (Round to two decimal places.)
Homework Answers
1.
=-9.5-5.3/1.107+20.5/1.107=4.230803975 million
2.
Borrow 4.23 million now and pay 4.23*1.107=4.68 million 1 year
later
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