Solved: Assume that this project requires a 400000 investment today, Corporate Finance

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Assume that this project requires a 400000 investment today

If Debbie's Drug Co. chooses to develop a new drug, it expects to receive cash flows of $150,000 in year 3, $300,000 in year 4, and $100,000 in year 5. The discount rate is 8%.

1. What is the present value of the expected future cash flows?

2. Assume that this project requires a $400,000 investment today (or else the future cash flows will not happen). Should the firm make this investment?

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Corporate Finance: Assume that this project requires a 400000 investment today

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