What are normal and non normal cash flows

Assignment Help Financial Management

Reference no: EM131886256

As a separate project (Project P), you are considering sponsoring a pavilion at the upcoming World’s Fair. The pavilion would cost $850,000, and it is expected to result in $7 million of incremental cash inflows during its 1 year of operation. However, it would then take another year, and $6 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 Flows

0 ($0.85)

1 7.0

2 (6.0)

The project is estimated to be of average risk, so its cost of capital is 10%.

1. What are normal and non normal cash flows?

2. What is Project P’s NPV? What is its IRR? What is its MIRR?

3. Draw Project P’s NPV profile. Does Project P have normal or nonnormal cash flows? Should this project be accepted?

Reference no: EM131886256

Questions Cloud

What will the price be in five years and in fourteen years : What will the price be in five years and in fourteen years?

What is each project equivalent annual annuity : What is each project’s initial NPV without replication? What is each project’s equivalent annual annuity?

Should wade accept an offer paying : If Wade’s boss requires an 8% interest rate, should Wade accept the offer? Should Wade accept an offer paying $11,000 per year for 6 years?

What is the fixed amount you have to save each month : If you can receive 5% interest annually on a savings account, what is the fixed amount you have to save each month?

What are normal and non normal cash flows : What are normal and non normal cash flows? What is Project P’s NPV? What is its IRR? What is its MIRR?

Dividend payment-what is the required return : If the stock currently sells for $49.60 per share, what is the required return?

What is the incremental ror between the two vehicles : What is the incremental ROR between the two vehicles? Provided the firm's MARR is 18% per year, which vehicle should it buy?

What happens to duration if maturity is now four years : What happens to duration if maturity is now 4 years?

The opportunity to borrow money at interest rate : You have the opportunity to borrow money at an interest rate of 10% per annum, How much should you borrow?

User Account

All Pages