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April 1, 2015

Homework Help: Finance

Posted by Toby on Friday, December 17, 2010 at 3:42pm.

It's January 1, 2011. Company XYZ wants to build a teddy bear factory. They have already spent $10 million dollars in the past year building the factory, and expect to spend $10 million dollars per year for the next 4 years, to be paid on December 31st each year (assume the first of these 4 payments occurs on December 31, 2011). On January 1, 2015, they will start selling the teddy bears and make exactly $70 million dollars in profit, received on December 31, 2015. On January 1, 2016 the company shuts down forever (no additional cash flows). The discount rate for this project is 10%.

What is the current NPV of this project (MM is in millions)? *

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