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Cromwell Industries is considering a new project with the following cash flows. After year 3,...

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Finance

Cromwell Industries is considering a new project with the following cash flows. After year 3, it assumes free cash flows will perpetually grow by 5% per year. If the interest rate is 10%, calculate the NPV of opening new stores: Year 0 Year 1 Year 2 Year 3 Net income -5,000,000 1,225,000 1,225,000 1,225,000 Depreciation 0 575,000 575,000 575,000 Capital expenditures 20,000,000 Change in net working capital 1,500,000 95,000 95,000 95,000 FCF

Year 0

Year 1

Year 2

Year 3

Net income

-5,000,000

1,225,000

1,225,000

1,225,000

Depreciation

0

575,000

575,000

575,000

Capital expenditures

20,000,000

Change in net working capital

1,500,000

95,000

95,000

95,000

FCF

?

?

?

?

$4.6 mil

$6.4 mil

$5.6 mil

$7.6 mil

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