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Cash flows/IRR/ NPV

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General Clinic has been asked to provide exclusive healthcare services for next year's State Exposition. Although flattered, the clinic's managers want to conduct a financial analysis of the project. Then, a net cash inflow of $1 million is expected from operations in each of the two years of the event. However, the clinic has to pay the organizers of the exposition a fee for the marketing value of the opportunity. This fee, which must be paid at the end of second year, is $2 million.

a. What are the net cash flows associated with the project?

$1 million for each of the two years = $2 million

b. What is the project's IRR?

c. Assuming a project cost of capital of 10 percent, what is the project's NPV?

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Solution Summary

The solution explains how to calculate the project cash flows and its IRR and NPV

Solution Preview

a. The cash flows are
Inflow of $ 1 million in year 1 and 2
Outflow of $ 2million in year 2 (the fee that is to be ...

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