From Part A above, assume that the bank decided to give a loan of $ 59 million to Nivea Corporation (recorded for the initial year). Nivea-Corporation invested the amount in a project and generated the following sequence of cash flows over six years: Year Cash Flow ($ million) 0 -59 1 4 2 5 3 6 4 7.33 5 8 6 8.25 Calculate the Net Present Value (NPV) and the Profitability Index (PI) over the six years. Assume discount rate 17% This project does not end after the sixth year but instead will generate cash flows far into the future. Estimate the project’s terminal value, assuming that cash flows after year 6 continue at $8.25 per year perpetuity and then recalculate the investment’s NPV. Calculate the terminal value assuming that cash flows after the sixth year grow at 2% annually in perpetuity, and then recalculate the NPV.

From Part A above, assume that the bank decided to give a loan of $ 59 million to Nivea Corporation (recorded for the initial year). Nivea-Corporation invested the amount in a project and generated the following sequence of cash flows over six years: Year Cash Flow ($ million) 0 -59 1 4 2 5 3 6 4 7.33 5 8 6 8.25 Calculate the Net Present Value (NPV) and the Profitability Index (PI) over the six years. Assume discount rate 17% This project does not end after the sixth year but instead will generate cash flows far into the future. Estimate the project’s terminal value, assuming that cash flows after year 6 continue at $8.25 per year perpetuity and then recalculate the investment’s NPV. Calculate the terminal value assuming that cash flows after the sixth year grow at 2% annually in perpetuity, and then recalculate the NPV.

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter14: Multinational Capital Budgeting

Section: Chapter Questions

Problem 1IEE

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From Part A above, assume that the bank decided to give a loan of $ 59 million to Zenith Corporation (recorded for initial year). Zenith-Corporation invested the amount in a project and generated the following sequence of cash flows over six years: Year Cash Flow ($ million) 0 -59 1 4 2 5 3 6 4 7.33 5 8 6 8.25 Calculate the Net Present Value (NPV) and the Profitability Index (PI) over the six years. Assume discount rate 13% This project does not end after the sixth year but instead will generate cash flows far into the future. Estimate the project’s terminal value, assuming that cash flows after year 6 continue at $8.25 per year perpetuity and then recalculate the investment’s NPV. Calculate the terminal value assuming that cash flows after the sixth year grow at 2% annually in perpetuity, and then recalculate the NPV.
From Part A above, assume that the bank decided to give a loan of $ 59 million to Nivea Corporation (recorded for initial year). Nivea-Corporation invested the amount in a project and generated the following sequence of cash flows over six years: Year Cash Flow ($ million) 0 -59 1 4 2 5 3 6 4 7.33 5 8 6 8.25 Calculate the Net Present Value (NPV) and the Profitability Index (PI) over the six years. Assume interesr rate is 13% This project does not end after the sixth year but instead will generate cash flows far into the future. Estimate the project’s terminal value, assuming that cash flows after year 6 continue at $8.25 per year perpetuity and then recalculate the investment’s NPV. Calculate the terminal value assuming that cash flows after the sixth year grow at 2% annually in perpetuity, and then recalculate the NPV.
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