Assignment:
Question 1. Computing net present value. Gators, Inc., is considering a project that requires an initial investment of $2,000,000 and that will generate the following cash inflows for the next five years:
|
Year
|
Cash Inflow at End of Year
|
|
1 ............................................................................................................................................
|
$300,000
|
|
2 ............................................................................................................................................
|
400,000
|
|
3 ............................................................................................................................................
|
800,000
|
|
4 ............................................................................................................................................
|
800,000
|
|
5 ............................................................................................................................................
|
600,000
|
Calculate the net present value of this project if Gator's cost of capital is
a. 12 percent.
b. 20 percent.