GDebi Enterprises is thinking of building a chemical processing plant to produce

Question

GDebi Enterprises is thinking of building a chemical processing plant to produce 4-hydroxy-3-methoxybenzaldehyde. The firm estimates that the initial cost of the project will be $11.4 million, and the plant will produce cash inflows of $7.3 million for the next 5 years, after which time the project will terminate. In the 6th year however, the firm will need to clean up the site, which it estimates will cost it $4.2 million. The discount rate the firm wants to use for the project is 10.7 percent. What is the NPV of this project? (Enter answer in millions.)

Explanation / Answer

NPV=7.3*PVIFA(10.7,5)-11.4-4.2/1.107^6=13.47 million

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