Question
The firm has an opportunity to invest in a new project. The project requires an initial investment of $1.2 million today and it will generate
The firm has an opportunity to invest in a new project. The project requires an initial investment of $1.2 million today and it will generate additional earnings in the next 10 years. The first additional annual earnings of $0.3 million will begin one year from now and grow at 10% each year thereafter. The appropriate discount rate on the stock is 13% and growth rate g=10%. Calculate the NPV of the new project (assume that the earnings generated are all paid out as cash dividends.)
The answer is 1,159,136.93 but how does it lead to this answer? Looking for "detailed" explanations.
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