week 2 question 3

You run a construction firm. You have just won a contract to build a government office building. It will take one year to construct it, requiring an investment of $10.00 million today and $5.00 million in one year. The government will pay you $20.00 million upon the building's completion. Suppose the cash flows and their times of payment are certain, and the risk-free interest rate is 10%. a. What is the NPV of this opportunity? b. How can your firm turn this NPV into cash today? a. What is the NPV of this opportunity? The NPV of this opportunity is $ million. (Round to two decimal places.) b. How can your firm turn this NPV into cash today? (Select from the drop-down menus.) The firm can borrow firm can use cost of today, and pay it back with 10% interest using the of the next year. This leaves to cover its costs today and save in cash for the firm today. it will receive from the government. The in the bank to earn 10% interest to cover its