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5. You run a construction company and you have just won a contract to build a...

5. You run a construction company and you have just won a contract to build a government building. Construction currently costs $10 million and will cost $5 million a year later. The government will pay $20 million after the building is completed a year later. Assume the cost of capital is 10%.
a. What is the NPV of this business opportunity?
  b. How could your company convert the NPV of this business into current cash?

7. Marian Plunket has her own business and is considering new investments. By making this investment, you will earn $4,000 at the end of each year for the next three years. However, you have to invest $1,000 as an initial investment and $5,000 at the end of the second year. If the cost of capital is 2% per year, what is the NPV of this opportunity? Should Marianne adopt this investment?
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Answer #1

5. a. NPV=$3636363.64

b. Thr company can convert NPV inyi cash by getting a loan, bank loan or mortgages.

6. a. NPV=$5729.68

b. Yes, Marianne should adopt this investment because NPV is positive or NPV>0 for this business opportunity.

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