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bazaltina
2 months ago
6

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
Business
1 answer:
soldi70 [3.6K]2 months ago
8 0

Answer:

NPV = $246764705.88

Explanation:

The net present value of the stadium is calculated by subtracting the present value of cash outflow from the present value of cash inflow.

DATA

Initial cost = $800,000,000

Revenue from previous equipment sale = $85,000,000

Government funds designated for price reduction = $300,000,000

Discount factor for year 1 at 2% = 0.9804

Projected future cash inflow = $675,000,000

Resolution

NPV = Present value of cash inflows - Present value of cash outflows

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

NPV = $246,764,706

Calculation Details

PV of Cash inflow = $675,000,000 x 0.9804

PV of cash inflow = $661,764,706

PV of Cash outflow = Initial cost - Revenue from equipment sale - Government funding

PV of cash outflow = $800,000,000 - $85,000,000 - $300,000,000

PV of cash outflow = $415,000,000

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