Question

The initial price for a stadium is $800,000,000. There will be a 2% adjustment to the...

The initial price for a stadium is $800,000,000. There will be a 2% adjustment to the price, and $85,000,000 of revenue from the sale of previous equipment and land. The projected future cash flow is $675,000,000. The government has decided to provide $300,000,000 of cash to discount the price. What is the Net Present Value of the Stadium?

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Answer #1

NPV :
NPV = PV of Cash Inflows - PV of Cash Outflows
If NPV > 0 , Project can be accepted
NPV = 0 , Indifference point. Project can be accepted/ Rejected.
NPV < 0 , Project will be rejected.

PV of Cash Inflows = Projected CF PVF(r%, 2)

= $ 675,000,000 * PVF(2%,1)

= 675M * 0.9804

= $ 661,764,705.88

PV of Cash Outflows = $ 800M - $ 85M - $ 300 M

= $ 415 M

NPV = PV of Cash Inflows - PV of Cash Outflows

= $ 661,764,705.88 - $ 415,000,000

= $ 246764705.88

Pls do rate, if the answer is correct and comment, if any further assistance is required.

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