I . As a separate project (Project p), the firm is considering sponsoring a pavilion at the upcoming World’s Fair. The pavilion would cost $800,000,and it is expected to result in $5 million of incremental cash inflows during its 1 year of operation. However, it would then take another year, and $5million of cost, to demolish the site and return it to its original condition. Thus, Projected net cash flows look like this (in millionsof dollars):
The project is estimated to be of average risk, so its WACC is 10%
1) What is Project P’s NPV? What is its MIRR?
2) Draw ProjectP’s NPV Profile. Does Project P have normal or nonnormal cash flows? Should this project be accepted? Explain.