Question
Harvey Pine Cabins is developing a new model cabin kit. They anticipate an initial start-up cost of $200,000 to be paid as soon as the
Harvey Pine Cabins is developing a new model cabin kit. They anticipate an initial start-up cost of $200,000 to be paid as soon as the project is initiated. Expected annual cash flows from the project are $30,000 starting one year after the project is initiated and continuing in equal annual payments until the end of year 10. After that, they expect equal annual payments of $10,000 at the end of each year continuing forever. The first $10,000 will be received at the end of year 11. Find the NPV of the project if Harvey Pine has a cost of capital of 10%.
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