Does project p have normal or nonnormal cash flows

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As a separate project (Project P), you are considering sponsorship of a pavilion at the upcoming World's Fair. The pavilion would cost $800,000, and it is expected to result in $5 million of incremental cash inflows during its single year of operation.

However, it would then take another year and $5 million of costs to demolish the site and return it to its original condition. Thus, Project P's expected net cash flows look like this (in millions of dollars):

Year          Net Cash Flow

0                $-0.8

1                 5.0

2                -5.0

Problem 1: The project is estimated to be of average risk, so its cost of capital is 10%. Draw Project P's NPV profile. Does Project P have normal or nonnormal cash flows? Should this project be accepted?

Reference no: EM132998750

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