The company is starting new chemicals production facility with an initial investment of $1billion. They don’t expect to generate any cash flow for the first two years. In year 3, cash flow is expected to be $150 million and will increase by 15% every year till year 7 after which time it will decline by 2% until year 9. The company expects no growth in cash flows beyond year 9 and cash flows to continue at year 9 levels into foreseeable future.
Calculate the NPV and the pay-back period of this project.