NPV and EVA A project cost $1.2 million up front and will generate cash flows in...

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NPV and EVA A project cost $1.2 million up front and will generate cash flows in perpetuity of $210,000. The firms cost of c

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Answer 1

Answer #1

Upfront cost of project = $1.2 million = $ 12,00,000

Perpetual cash flow = $210,000

Cost of capital = r = 14%

PV of perpetual Cash flow = $ 210,000/r = $ 210,000/0.14 = $ 15,00,000

NPV of the project = PV of perpetual Cash flow - Upfront cost of project = $ 15,00,000 - $ 12,00,000 = $ 3,00,000

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Answer 2

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