Gators, Inc., is considering a project that requires an initial investment of $2,000,000 and that will generate the following cash inflows for the next five years:
Year Cash Inflow at End of Year
1 ……………………………………………………………………………………… $300,000
2 ………………………………………………………………………………………… 400,000
3 ………………………………………………………………………………………… 800,000
4 ………………………………………………………………………………………… 800,000
5 …………………………………………………………………………………………. 600,000
Calculate the net present value of this project if Gator’s cost of capital is
a. 12 percent.
b. 20 percent.