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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 $9.35 million today and $5.00 million in one year. The government will pay you $21.50 million upon thebuilding's completion. Suppose the cash flows and their times of payment arecertain, and therisk-free interest rate is 11%.
a. What is the NPV of thisopportunity?
b. How can your firm turn this NPV into cashtoday?
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