I’d love some help with a scenario involving a sustainable energy company that’s into renewable tech like solar panels and wind turbines. Their CEO recently hired a consultant for a four-year project review, which cost $1,000. The project is projected to bring in annual cash inflows of $1,650 for those four years but requires an upfront $3,000 investment, and it also has a $2,000 closing cost in the last year. So, with a required return rate of 10%, how would we go about calculating the project’s NPV, and is this project something worth considering? Also, in this context, does it make sense to look at IRR for evaluating this project, even without going through the full calculations? Lastly, since the CEO has limited capital and is looking at several projects, they’re planning to go with the combination that maximizes NPV. What do you think about this strategy for picking and deciding on projects?
I’d love some help with a scenario involving a sustainable energy company that’s into renewable tech like solar panels and wind turbines. Their CEO recently hired a consultant for a four-year project review, which cost $1,000. The project is projected to bring in annual cash inflows of $1,650 for those four years but requires an upfront $3,000 investment, and it also has a $2,000 closing cost in the last year.
So, with a required return rate of 10%, how would we go about calculating the project’s NPV, and is this project something worth considering?
Also, in this context, does it make sense to look at IRR for evaluating this project, even without going through the full calculations?
Lastly, since the CEO has limited capital and is looking at several projects, they’re planning to go with the combination that maximizes NPV. What do you think about this strategy for picking and deciding on projects?
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