Cromwell Industries is considering a new project with the following cash flows. After year 3,...
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Cromwell Industries is considering a new project with the following cash flows. After year 3, it assumes free cash flows will perpetually grow by 5% per year. If the interest rate is 10%, calculate the NPV of opening new stores: Year 0 Year 1 Year 2 Year 3 Net income -5,000,000 1,225,000 1,225,000 1,225,000 Depreciation 0 575,000 575,000 575,000 Capital expenditures 20,000,000 Change in net working capital 1,500,000 95,000 95,000 95,000 FCF
Year 0
Year 1
Year 2
Year 3
Net income
-5,000,000
1,225,000
1,225,000
1,225,000
Depreciation
0
575,000
575,000
575,000
Capital expenditures
20,000,000
Change in net working capital
1,500,000
95,000
95,000
95,000
FCF
?
?
?
?
$4.6 mil
$6.4 mil
$5.6 mil
$7.6 mil
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