Question
You are valuing a project involving patient care packages that friends and relatives can customize and order online. The project would involve an up-front investment
You are valuing a project involving patient "care packages" that friends and relatives can customize and order online. The project would involve an up-front investment of $2,000,000 on January 1, 2021. The project would generate annual free cash flow each January 1, with the first cash flow received January 1, 2022. The 2022 after-tax cash flow is expected to be $100,000. This amount will double each year for three years thereafter. Beyond that, the after-tax cash flow is expected to increase 10% per year in perpetuity. If your required rate of return on this risky venture is 25%, what is the project's NPV on January 1, 2021?
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