The objective of a firm is to maximize shareholder wealth. The Net Present Value (NPV) method is one of the useful methods that help financial managers to maximize shareholdersâ€™ wealth. Suppose the company that you selected for the Module 1 SLP is considering a new project that will have an initial cash outflow of $125,000,000. The project is expected to have the following cash inflows: Year Cash Flow ($) 1 2,000,000 2 3,500,000 3 13,500,000 4 89,750,000 5 115,000,000 6 120,000,000 If the projectâ€™s cost of capital (discount rate) is 12.5%, what is the projectâ€™s NPV? Should the project be accepted? Why or why not? You may use the following steps to calculate NPV: 1. Calculate present value (PV) of cash inflow (CF) PV of CF = CF1 / (1+r)^1 + CF2 / (1+r)^2 + CF3 / (1+r)^3 + CF4 / (1+r)^4 + CF5 / (1+r)^5 + CF6 / (1+r)^6 Where the CFs are the cash flows and r = the projectâ€™s discount rate. 2. Calculate NPV NPV = Total PV of CF â€“ Initial cash outflow or -Initial cash outflow + Total PV of CF r = Discount rate (12.5%) If you do not know how to use Excel or a financial calculator for these calculations, please use the present value tables. Describe the purpose of the report and provide a conclusion. An introduction and a conclusion are important because many busy individuals in the business environment may only read the first and the last paragraph. If those paragraphs are not interesting, they never read the body of the paper. Answer the SLP Assignment question(s) clearly and provide necessary details. Write clearly and correctlyâ€”that is, no poor sentence structure, no spelling and grammar mistakes, and no run-on sentences.
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