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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
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 $ 8.91
$8.91 million today and $ 5.00
$5.00 million in one year. The government will pay you $ 20.50
$20.50 million upon thebuilding's completion. Suppose the cash flows and their times of payment arecertain, and therisk-free interest rate is 10 %
10%.
a. What is the NPV of thisopportunity?
b. How can your firm turn this NPV into cashtoday?
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