From Part A above, assume that the bank decided to give a loan of $ 59 million to Nivea Corporation (recorded for initial year). Nivea-Corporation invested the amount in a project and generated the following sequence of cash flows over six years: Year Cash Flow ($ million) 0 -59.00 1 4.00 2 5.00 3 6.00 4 7.33 5 8.00 6 8.25 1.Calculate the terminal value assuming that cash flows after the sixth year grow at 2% annually in perpetuity, and then recalculate the NPV use an interest rate of 10%
From Part A above, assume that the bank decided to give a loan of $ 59 million to Nivea Corporation (recorded for initial year). Nivea-Corporation invested the amount in a project and generated the following sequence of cash flows over six years: Year Cash Flow ($ million) 0 -59.00 1 4.00 2 5.00 3 6.00 4 7.33 5 8.00 6 8.25 1.Calculate the terminal value assuming that cash flows after the sixth year grow at 2% annually in perpetuity, and then recalculate the NPV use an interest rate of 10%
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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PART B
From Part A above, assume that the bank decided to give a loan of $ 59 million to Nivea Corporation (recorded for initial year). Nivea-Corporation invested the amount in a project and generated the following sequence of cash flows over six years:
|
Year |
Cash Flow ($ million) |
|
0 |
-59.00 |
|
1 |
4.00 |
|
2 |
5.00 |
|
3 |
6.00 |
|
4 |
7.33 |
|
5 |
8.00 |
|
6 |
8.25 |
1.Calculate the terminal value assuming that cash flows after the sixth year grow at 2% annually in perpetuity, and then recalculate the NPV use an interest rate of 10%
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