What is project expected NPV

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Seong Hotels is interested in developing a new hotel is Seoul. The initial investment of the project is $20 million, but cashflows could differ if the government imposes a hotel tax. There is a 60% chance a hotel tax will be imposed and cash flows would be $2 million per year for 20 years. However, there is a 40% chance there will not be a tax imposed so cash flows would be $4 million per year for 20 years. They will not know if the tax will be imposed until next year. What is the project's expected NPV if they wait and implement the project one year from now? Cost of capital is 10%.

Reference no: EM132047241

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