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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
- 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 $3,250,000 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)
- What is the total PV of the inflows?
- What is the total PV of outflows for the material cost (IE $500,000 yearly)?
- What is the total PV of outflows for the labour cost (IE $45,000 monthly at beginning)?
- What is the total NPV (final answer)?
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