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 $14.8 million, and the plant will produce cash inflows of $6.5 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 $3.3 million. The discount rate the firm wants to use for the project is 13.7 percent. What is the NPV of this project? (Enter answer in millions.)

Explanation / Answer

i 13.70% Year 0 1 2 3 4 5 6 Cashflows -14.8 6.5 6.5 6.5 6.5 6.5 -3.3 DCF -14.8 5.716799 5.027967 4.422135 3.8893 3.420669 -1.527394251 NPV 6.149475

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