The Stillman School of Business is thinking about starting a Continuing Educatio

Question

The Stillman School of Business is thinking about starting a Continuing Education Program in which students can earn a Certificate in Financial Planning. They expect that the upfront costs of the expansion will be $100,000. After that they expect that the program will generate the following free cash flows starting at t = 1, the following free cash flows from the expansion starting in t = 1 to be $1500, $2000, and $4000. After that cash flows are expected to grow at a rate of 3% forever. The cost of capital for this project is 5%. What is the total current value (NPV) of this investment?

A. $84,648.53

B. $76,174.69

C. $106,697.98

D. -$99,675.93

E. None of these

Explanation / Answer

NPV=-100000+1500/1.05^1+2000/1.05^2+4000/1.05^3+((4000*1.03)/(0.02))/1.05^3=84,648.53

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.