Question
You are hired as a consultant for a client considering the following 4-year BIOTECH project X: Initial Capital Spending (paid at T=0): an asset worth
You are hired as a consultant for a client considering the following 4-year BIOTECH project X:
Initial Capital Spending (paid at T=0): an asset worth $100 mil
The asset will have no book value and will be completely worthless at the end of project's life
Initial investment in Net Working Capital (paid at T=0): $8 million. NWC levels are supposed to increase by $1 mil per year.
The project will generate Operating Cash Flows OCF=$30 mil per year, for every year from Year 1 to Year 4.
The cost of capital for the project is 16%.
What is the NPV of such a project? Should your client accept it? Why or why not?
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Answer Calculation of NPV and Investment Decision To calculate the net present value NPV of the BIOT...
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Fundamentals of Financial Management
Authors: Eugene F. Brigham, Joel F. Houston
12th edition
978-0324597714, 324597711, 324597703, 978-8131518571, 8131518574, 978-0324597707
