Question
You are the towns finance director. You have just let a contract to a construction firm to build a government office building. The building will
You are the towns finance director. You have just let a contract to a construction firm to build a government office building. The building will be built, in part using your own work force, and in part by the contractor. Construction will require the towns investment of $10 million today, and $5 million in one year. And the town will also pay the contractor $20 million in one year, upon completion of the new building. Suppose the cash flows and their timing are known with great certainty, and the interest rate is 10%. What is the NPV of this opportunity?
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