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Question 12 20 pts Gracen Inc is evaluating a new expansion opportunity. The project requires an upfront investment of $14 million. Gracen will also increase
Question 12 20 pts Gracen Inc is evaluating a new expansion opportunity. The project requires an upfront investment of $14 million. Gracen will also increase inventory by $6 million in year one. In year two, as Gracen increased credit sales, accounts receivable are expected to increase by $3 million. In year five, when the project is complete all accounts receivable will be collected, decreasing receivables by $3 million. Gracen will also decrease its inventory by $3 million. If the project produces operating cash flows at $3.5 million per year and Gracen's cost of capital is 7.5%, what is the NPV of the project? $4.16 mil $10.16 mil 3-3.84 mil 5-2.82 mil
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