A proposed nuclear power plant will cost $1.4 bilion to build and then will prod

Question

A proposed nuclear power plant will cost $1.4 bilion to build and then will produce cash flows of $220 million a year for 15 years. After that period (in year 15), it must be decommissioned at a cost of $820 million, what is project NPV if the discount rate is 5%? what if it is 18%? (Negative amounts should be indicatad by a minus algn. Do not round intermediate calculationa. Entar your anewere In blions rounded to 3 decimal places.) Discount Rate 5% 1896 1.046 billion 3.823 billion Hints References eBook & Resources Hint #1

Explanation / Answer

NPV at 5%

=-(1.4*1000)+((220*(1-(1+5%)^(-15)))/5%)-820/(1+5%)^15

=489.09 million or 0.489 bn

NPV at 18%

=-(1.4*1000)+((220*(1-(1+18%)^(-15)))/18%)-820/(1+18%)^15

=-348.34 million or -0.348 billion

the above is answer..

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