You have been asked to estimate the NPV of an investment in a new 3-year venture for

a telecomm firm.

a. The initial investment is expected to be $750 million and will be depreciated

straight line over three years with no salvage value at the end of the project.

b. During the three years, working capital is expected to be 12% of revenues and

the investment has to be made at the start of each year; it will be fully salvaged at

the end of the project.

c. The cost of capital for the investment is 9.5% and the tax rate is 22.0%.

d. The project's revenues and EBITDA are presented below for the next 3 years (in millions of dollars)

Calculate the following:

a) (15 points) Free cash flows of the project

b) (5 points) NPV

c) (5 points) IRR

d) (5 points) Payback period