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8) Alaric Incorporated has entered the nuclear technology industry. They plan to make, sell and service a nuclear reactor to the government of Ontario. The
8) Alaric Incorporated has entered the nuclear technology industry. They plan to make, sell and service a nuclear reactor to the government of Ontario. The sale (cash inflow) includes payments of $3,450,000 today, $4,000,000 in 5 years and $6,000,000 in 10 years to Alaric Inc. The costs for all material (machinery, software, hardware, electronics, other parts) will be $500,000 at the end of every year for 10 years. The labour costs are to be beginning of the month contract labour payments (cash outflow) of $45,000 for 10 years (first to make and then service the nuclear reactor). If the cost of money is 12% compounded annually, what is the NPV of the project? (6) a. What is the total PV of the inflows? b. What is the total PV of outflows for the material cost (IE $500,000 yearly)? c. What is the total PV of outflows for the labour cost (IE $45,000 monthly at beginning)? d. What is the total NPV (final answer)
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