Calculate the project npv if the company proceeds now

Assignment Help Financial Management

Reference no: EM132037130

Marcal Corporation is considering a project would cost $5.5 million today and generate positive cash flows of $3 million a year at the end of each of the next 4 years. The project's cost of capital is 11%.

a. Calculate the project's NPV if the company proceeds now..

b. The company is fairly confident about its cash flow forecast, but expects to have better price information in 2 years. The company believes the cost would be $6.5 million in 2 years. It estimates there is a 70% change CFs will be $4.5 million for 4 years and a 30% change CFs will be $2 million for 4 years. Should the company proceed with the project now or wait 2 years until it has better information?

c. Apart from the calculationsabove,discuss3 qualitative factors that the company should considerwhenmaking its decision on accepting the new project.

PLEASE SHOW WORK IN EXCEL,

Reference no: EM132037130

Questions Cloud

Important influences in development of banking crisis : All of these are recognized as important influences in the development of the banking crisis of 2008 and the resulting credit crisis EXCEPT

Predatory lenders in personal financial decisions : How can you guard against predatory lenders in your personal financial decisions.

Calculate the non-operating terminal year cash flow : Calculate the non-operating terminal year cash flow. What is the cash outflow at Time 0?

Value of the company due to expected bankruptcy costs : The corporate tax rate is 35 percent. What is the decrease in the value of the company due to expected bankruptcy costs?

Calculate the project npv if the company proceeds now : Calculate the project's NPV if the company proceeds now.

What is the value of the company : The company also has a perpetual bond issue outstanding with a market value of $2.01 million. What is the value of the company?

Participate in informal learning activities : What do you think can be done to encourage these employees to participate in informal learning activities?

What is the expected value of sales : What is the expected value of sales?

Example of financial operating assumption : Which one of the following is NOT the example of financial operating assumption?

User Account

All Pages