Question

You run a construction firm. You have just won a contract to build a government office complex. Building it will require an investment of

$ 9.5

million today and

$ 4.6

million in one year. The government will pay you

$ 21.5

million in one year upon the​ building's completion. Suppose the interest rate is

10.6 %

a. What is the NPV of this​ opportunity?

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

a. What is the NPV of this​ opportunity?

The NPV of the proposal is

​$

million.  ​(Round to two decimal​ places.)

b. How can your firm turn this NPV into cash​ today?  ​(Select the best choice​ below.)

A.The firm can borrow

$ 14.1

million today and pay it back with

10.6 %

interest using the

$ 19.44

million it will receive from the government.

B.The firm can borrow

$ 23.60

million today and pay it back with

10.6 %

interest using the

$ 21.5

million it will receive from the government.

C.The firm can borrow

$ 14.1

million today and pay it back with

10.6 %

interest using the

$ 21.5

million it will receive from the government.

D.The firm can borrow

$ 19.44

million today and pay it back with

10.6 %

interest using the

$ 21.5

million it will receive from the government.

Answer 1