Problem:
New Co is considering investing in a new hotel project. The project will need an initial investment of £1,000,000 in year zero and will generate £500,000 (after-tax) cash flows for the four subsequent years. In the fourth year the project will need an additional investment of £250,000. The cost of capital will be 10% in the first year and 6% in the second, third and fourth year.
Required:
Question: What is the NPV of the project?
Note: Solve the problem and show all work.