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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

$ 10.87

million today and

$ 5.00

million in one year. The government will pay you

$ 25.00

million upon the building's completion. Suppose the cash flows and their times of payment are certain, and the risk-free interest rate is

12 %.

a. What is the NPV of this opportunity?

b. How can your firm turn this NPV into cash today?

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