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A company is considering the purchase of land and the construction of a new plant....

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Finance

A company is considering the purchase of land and the construction of a new plant. The land, which would be bought immediately (at t=0), has a cost of $100,000. The building, which would be built at the end of the first year (at t=1) would cost $500,000. It is estimated that the plant will generate FCFF of $100,000 starting at the end of the second year and that this cash flow will increase at an annual rate of 10% over the next 10 years (there are 10 total positive cash flows including the first $100,000 positive cash flow).

What is the NPV using a WACC of 15%? Please show work.

(Hint: do not forget to discount the cash outflow at t=1 back to t=1 as the costs of the project)

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