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You run a construction firm. You have just won a contract to build a government office...

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Finance

You run a construction firm. You have just won a contract tobuild a government office building. It will take one year toconstruct it requiring an investment of $ 10.23 million today and $5.00 million in one year. The government will pay you $ 22.50million upon the? building's completion. Suppose the cash flows andtheir times of payment are? certain, and the? risk-free interestrate is 8 %. a. What is the NPV of this? opportunity? b. How canyour firm turn this NPV into cash? today?

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3.6 Ratings (331 Votes)
All financials below are in mn Part a NPV C0 C1 1 r where C0 is the investment at t 0 and is 1023 C1 is the net cash flow in year 1 5 225 175 and r    See Answer
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You run a construction firm. You have just won a contract tobuild a government office building. It will take one year toconstruct it requiring an investment of $ 10.23 million today and $5.00 million in one year. The government will pay you $ 22.50million upon the? building's completion. Suppose the cash flows andtheir times of payment are? certain, and the? risk-free interestrate is 8 %. a. What is the NPV of this? opportunity? b. How canyour firm turn this NPV into cash? today?

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