A New Grocery Store Requires $50 Million in Initial Investment

question 63

Multiple Choice

A new grocery store requires $50 million in initial investment. You estimate that the store will generate $5 million of after-tax cash flow each year for five years. At the end of five years, it can be sold for $60 million (ignore taxes) . What is the NPV of the project at a discount rate of 10 percent?

• A)$2.42 million
• B)$10.82 million
• C)$6.21 million
• D)$2.82 million

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Definitions:

Selling Price

Selling price is the amount of money for which a product or service is sold to the consumer.

Interest-Based Negotiation

A negotiation strategy focusing on the underlying interests of the parties involved rather than their initial positions.

Illustrate

To explain or make something clear by using examples, pictures, or diagrams.

Both Parties

Refers to the two sides or entities involved in a discussion, negotiation, or legal matter.