NPV OF A PROJECT
A proposed nuclear power plant will cost $2.2 billion to build and then will produce cash flows of $300 million a year for 15 years. After that period (in year 15), it must be decommis-sioned at a cost of $900 million.(LO8-1and LO8-2)
a. What is project NPV if the discount rate is 5%?
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b. What if the discount rate is 18%?12. NPV/IRR. A new computer system will require an initial outlay of $20,000, but it will increase the firm’s cash flows by $4,000 a year for each of the next 8 years. (LO8-1)
a. Is the system worth installing if the required rate of return is 9%?
b. What if the required return is 14%?
c. How high can the discount rate be before you would reject the project?
