- The National Grid Corporation proposes to construct a new nuclear power plant to meet the increased demand for electricity. The plant will cost $2.2 billion to build. Cash flows provided by the plant will amount to $300 million per year for 15 years. At the end of year 15, the plant will be decommissioned. The cost of decommissioning is estimated to be $900 million. Calculate the project’s NPV if the discount rate is 5%.
- You have an opportunity to invest $100,000 now in return for $80,300 in one year and $30,300 in two years. If your cost of capital is 9.2%, what is the NPV of this investment?
- When would an investor risk investing in a negative net present value on equipment? Would an MRI or new hospital beds be worth the risk? Explain your answer.
- A project has an initial cost of $35,000, expected net cash inflows of $9,000 per year for nine years, and a cost of capital of 14%. What is the project’s NPV?
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