Compute the net present value and the irr for the venture

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Uneven Cash Flows, NPV MaxiCare Corporation, a not-for-profit organization, specializes in health care for senior citizens. Management is considering whether to expand operations by opening a new chain of care centers in the inner city of large metropolises. For a new facility, initial cash outlays for lease, renovations, net working capital, training, and other costs are expected to be about $15 million in year 0. The corporation expects the cash inflows of each new facility in its first year of operation to equal the total cash outlays for the year. Net cash inflows are expected to increase to $1 million in each of years 2 and 3, $2.5 million in year 4, and $3 million in each of years 5 through
10. The lease agreement for the facility will expire at the end of year 10, and MaxiCare expects the cost to close a facility will pretty much exhaust all cash proceeds from the disposal. Cost of capital for MaxiCare is 12 percent.

Required: Compute the net present value (NPV) and the IRR for this venture. What is the break-even selling price for this investment, that is, the price that would yield an NPV of $0?

Reference no: EM13878367

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