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Anderson International Limited is evaluating a project in Erewhon. The project will create the following cash flows: Year Cash Flow 0 $ 1,455,347 1 335,000
Anderson International Limited is evaluating a project in Erewhon. The project will create the following cash flows: Year Cash Flow 0 $ 1,455,347 1 335,000 2 400,000 3 295,000 4 250,000 All cash flows will occur in Erewhon and are expressed in dollars. In an attempt to improve its economy, the Erewhonian government has declared that all cash flows created by a foreign company are blocked and must be reinvested with the government for one year. This means that the company will receive the cash flow, along with the interest one year later. For instance the year 1 cash flow along with the interest will only arrive at the company at the end of year 2. The reinvestment rate for these funds is 4 percent. If the company uses a required return of 7 percent on this project, what is the NPV of the project
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