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As a separate project (Project P), the firm is considering sponsoring a pavilion at the upcoming World's Fair. The pavilion would cost $800,000, and it
As a separate project (Project P), the firm is considering sponsoring a pavilion at the upcoming World's Fair. The pavilion would cost $800,000, and it is expected to result in $5 million of incremental cash inflows during its 1 year of operation. However, it would then take another year, and $5 million of costs, to demolish the site and return it to its original condition. Thus, Project P's expected cash flows (in millions of dollars) look like this: i. -$0.8 $5.0 -$5.0 The project is estimated to be of average risk, so its WACC is 10%. 1. What is Project P's NPV? What is its IRR? Its MIRR? 2. Draw Project P's NPV profile. Does Project P have normal or nonnormal cash flows? Should this project be accepted? Explain
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