What is the projects net present value

Assignment Help Financial Management

Reference no: EM13765798

Garner-Wagner is considering investing in a project that requires an investment of $3,000,000. The project will generate a cash inflow of 500,000 per year for the next 5 years. The cost of capital is 10%. What is the project's net present value?

If Garner-Wagner goes ahead with this project today, it will obtain knowledge that will give rise to additional opportunities 5 years from now (at t = 5). The company can decide at t = 5 whether or not it wants to pursue these additional opportunities. Based on the best information available today, there is a 35% probability that the outlook will be favorable, in which case the future investment opportunity will have a net present value of $6 million at t = 5. There is a 65% probability that the outlook will be unfavourable, in which case the future investment opportunity will have a net present value of -$6 million at t- = 5. Garner-Wagner does not have to decide today whether it wants to pursue the additional opportunity. Instead, it can wait to see what the outlook is. However, the company cannot pursue the future opportunity unless it makes the $3 million investment today. What is the estimated net present value of the project, after consideration of the potential future opportunity?

Reference no: EM13765798

Questions Cloud

Write information technology project management : Write clearly and concisely about Information Technology Project Management topics using proper writing mechanics and technical style conventions.

Demand and supply shocks : Demand and Supply Shocks Which of the following can be inflationary?

What laws protect victims including use of protection orders : What information needs to be in the report and why, How best to help a victim, What laws protect victims, including the use of protection orders, Why victims return to abusers

The crime scene parameters of an arson fire : Describe the crime scene parameters of an arson fire, including one where an explosive reaction may have occurred.

What is the projects net present value : Garner-Wagner is considering investing in a project that requires an investment of $3,000,000. The project will generate a cash inflow of 500,000 per year for the next 5 years. The cost of capital is 10%. What is the project's net present value?

Unavailability of certain pharmaceutical items : How would you approach the physician and what are the reasons for the unavailability of certain pharmaceutical items because of third-party payer reimbursement schemes?

Compute the correlation coefficient of the two return series : Compute the covariance of the two return series. Compute the correlation coefficient of the two return series. Compute the risk of the portfolio.

What is the total profit : Its average fixed costs are $50. Its average variable costs are $25. What is the total cost (TC) of producing 1,000 units of output (Q)? If the price (P) of the good is $100 what is the total revenue? What is the total profit?

Create charts to illustrate data : Courtyard Medical Plaza (CMP) is a full-service medical office complex providing customers with a variety of medical services in one location. For this project you create charts to illustrate data about the number of procedures performed

User Account

All Pages