Question
Consider the following projects. Project C0 C1 C2 C3 C4 C5 A -1,000 +1,000 0 0 0 0 B -2,000 +1,000 +1,000 +4,000 +1,000 +1,000
Consider the following projects.
| Project | C0 | C1 | C2 | C3 | C4 | C5 |
|---|---|---|---|---|---|---|
| A | -1,000 | +1,000 | 0 | 0 | 0 | 0 |
| B | -2,000 | +1,000 | +1,000 | +4,000 | +1,000 | +1,000 |
| C | -3,000 | +1,000 | +1,000 | 0 | +1,000 | +1,000 |
Assume that this firms beta= 1.5 The expected market return is 12%.
The risk free rate is 2.5%. This company can borrow debt at 5.2%.
The firm has $5 billion in debt. It has 6 billion shares outstanding at $3 price/shr.
The corporate tax rate (Tc) = 21%
Question: What is the NPV of project B ?
The NPV for project B is -$128
The NPV for project B is -$122
The NPV for project B is $2,158
The NPV for project B is $3,458
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The Public Private Partnership Handbook
Authors: Malcolm Morley
1st Edition
0749474262, 978-0749474263
