The company you picked is starting a new project. The initial cost of the project () is 10% of the most recent year’s capital expenditure of the company. With this new project, the company is going to receive a cash flow of 1% of the most recent year’s revenue for each of the next five years (). The discount rate (WACC).
Calculate the Net Present Value, Payback Period, and Internal Rate of Return of this project.
Interpret the values you calculated. Should the company proceed with the project or not?
Capital Expenditure = $386,000,000
Initial Cost of Project = $38,600,000
Revenue = $3,565,000,000
Cashflow = $35,650,000
Initial Investment = $38,600,000
Discount Rate (WACC) = 1.79%
CF 1 = $35,650,000
CF 2 = $356,500
CF 3 = $3,565
CF 4 = $35.65
CF 5 =$ 0.36
NPV = -$3,229,427.52