a firm is considering a potential investment project that would result in an immediate loss in free cash flow of $94 million, but would generate positive free cash flow of $ 7 million next year. The firm expects the free cash flow produced by the project to grow annually at 2 % forever. The firm's weighted average cost of capital is 6 %. What is the NPV of the project?
NPV = PV of cash Inflows - PV of Cash Outflows
PV of Cash Inflows = CF Next Year / [ WACC - Growth Rate ]
= $ 7 M / [ 6% - 2% ]
= $ 7 M / 4%
= $ 175 M
NPV = PV of cash Inflows - PV of Cash Outflows
= $ 175 M - $ 94 M
= $ 81 M
NPV of Project is $ 81M
a firm is considering a potential investment project that would result in an immediate loss in...
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