What is the npv of this opportunity

Assignment Help Financial Management
Reference no: EM131859650

You run a construction firm. You have just won a contract to construct a government office building. Constructing it will take one year and require an investment of $10 million today and $5 million in one year. The government will pay you $20 million upon the building’s completion. Suppose the cash flows and their times of payment are certain, and the risk-free interest rate is 10%.

What is the NPV of this opportunity?

How can your firm turn this NPV into cash today?

Reference no: EM131859650

Questions Cloud

Apr quote for this account based on semiannual compounding : What is the APR quote for this account based on semiannual compounding? What is the APR with monthly compounding?
Decided to refinance your mortgage : You have decided to refinance your mortgage. You plan to borrow whatever is outstanding on your current mortgage.
Firm annual payment be if it signs up for mortgage : BTU Inc. is thinking of purchasing a house. What will the firm’s annual payment be if it signs up for this mortgage?
Make the cost of renting comparable to purchasing : What rate must rental cost increase each year to make the cost of renting comparable to purchasing?
What is the npv of this opportunity : You run a construction firm. You have just won a contract to construct a government office building. What is the NPV of this opportunity?
Equivalent yield to maturity on each of these treasury bills : Calculate the bank discount rate on each bill if it is held to maturity. What is the equivalent yield to maturity on each of these treasury bills?
Indifferent between the two forms of payment : what final payment will the bank require you to make so that it is indifferent between the two forms of payment?
What is difference in their offers in terms of dollars today : What is the difference in their offers in terms of dollars today? Which offer should your firm take?
Investment opportunity in japan : You have an investment opportunity in Japan. It requires an investment of $1 million today and will produce cash flow of ¥ 114 million in one year with no risk.

Reviews

Write a Review

Financial Management Questions & Answers

  Using constant growth valuation-what is the expected return

You are looking at investing in SML Industries stock. Risk free rate is 2%, rm is 11%, Beta is 1.2. Growth is 4%. Do is $3.00. Current price is $75. Using CAPM, what is the required return? Using constant growth valuation, what is the expected return..

  What should be value of each share of stock in his company

Rodney Murdock just began operating his own business, the Murdock Construction Company. Murdock obtained $50 million of equity capital from friends and relatives by selling them an aggregate of 100,000 shares of stock. what should be the value of eac..

  How many rupees will you receive in the conversion

Suppose you want to convert U.S. dollars to Indian rupees. If you have $120,000 and the exchange rate is $0.0159 per rupee, how many rupees (in millions) will you receive in the conversion?

  What is the intrinsic value of this stock

LA Diversified Inc. recently paid its annual dividend ($3.00). Dividends have consistently grown at a rate of 3.80%. The stock has a beta of 0.88. The current risk-free rate is 2.40% and the market risk premium (RM - RF) is 8.50%. Assuming that CAPM ..

  When we determine the risk of a portfolio of two values

When we determine the risk of a portfolio of two values, measure it by the

  Capital half with debt and half with equity at existing rate

Gresham Corporation has 40% debt and 60% equity (market values) in its capital structure. The pretax cost of debt is 8.5%, and that of equity 15.5%. The total value of the company is $320 million and its income tax rate is 40%. The company has decide..

  Requires initial fixed asset investment

Down Under Boomerang, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $2.82 million.

  First proposed budget

The new finance head of a division that reports to you has just sent you his first proposed budget at the company. Walk through some of the things you are going to review and ask him questions about, especially since this is the first time you are se..

  According to the capital asset pricing model

According to the Capital Asset Pricing Model, the introduction of a risk-free asset renders the efficient frontier of efficient portfolios linear. How many portfolios of risky assets (portfolios of only risky assets) lie on the resulting Capital Mark..

  Different decisions regarding its capital structure

What might be different about RadioShack’s unhappy ending if it would have made different decisions regarding its capital structure?

  What is the total return from your investment

what is the total return from your investment (in percentage terms)?

  What is yield to maturity on these bonds

Jenny Clayton is looking to invest in some 5-year bonds that pay annual coupons of 6.25 percent on a face value of $1,000 and are currently selling for $588.79. What is the yield to maturity on these bonds?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd