MetalMouth Received a $1 Million Government Innovation Grant

question 85

Multiple Choice

MetalMouth received a $1 million government innovation grant. MetalMouth invested the grant money and developed a system to remove metal contaminants from storm water in shipyards. The firm estimates that each shipyard spends $500 000 a year on storm water clean-up efforts. If MetalMouth is able to sign up and retain four shipyards from the first year onwards, what is the present value (PV) of the project (net of investment) if the cost of capital for MetalMouth is 18% per year? Assume a cost of operations and other costs for MetalMouth equal 50% of revenue.

• A)$5.32 million
• B)$4.98 million
• C)$5.87 million
• D)$4.56 million