Compute the net present value of the laser copier project

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Fox Enterprises is considering expanding into the growing laser copier business. Fox estimates that this expansion will cost $1.8 million and will generate a 20 year stream of expected net cash flows amounting to $400,000 per year. The company's weighted cost of capital is 15%.

A. Compute the net present value of the laser copier project using the company's weighted cost of capital and the expected cash flows from the project.

B. Using the risk-adjusted discount rate approach, management has decided that this project has substantially more risk than average and has decided that it requires a 24 percent expected rate of return on projects like this. Recompute the risk-adjusted net present value of this project.

Reference no: EM13336306

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