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A project generates the following sequence of cash flows over six years Year Cash Flow ( S in millions ) - 5 9 . 0

A project generates the following sequence of cash flows over six years Year Cash Flow (S in millions)-59.004.005.006.007.338.008.254 a) Calculate the NPV over the six years. The discount rate is 11%. b)This project does not end after the sixth year, but instead will generate cash flows far into the future. Estimate the terminal value, assuming that cash flows after year 6 will continue at $8.25 million per year in perpetuity, and then recalculate the investment's NPV Calculate the terminal value, assuming that cash flows after the sixth year grow at 2 percent annually in perpetuity, and then recalculate the NPV Using market multiples, calculate the terminal value by estimating the project's market value at the end of year 6. Specifically, calculate the terminal value under the assumption that at the end of year 6, the project's market value will be 10 times greater than its most recent annual cash flow. Recalculate the NPV c) d)

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