Suppose you work at an organic milk company, your boss asked you to evaluate a...
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Suppose you work at an organic milk company, your boss asked you to evaluate a project with an infinite life. Sales and costs project to $2,000 and $1,200 per year, respectively. (Assume sales and costs occur at the end of the year [i.e., profit of $500 at the end of year one]). There is no depreciation and the tax rate is 30 percent. The real required rate of return is 15 percent. The inflation rate is 10 percent and is expected to be 10 percent forever. Sales and costs will increase at the rate of inflation. If the project costs $2,800, what is the NPV?
Please show work through an equation, not sure where to start.
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