A project brings the following cash flow to the company. The company uses its WACC (weighted-average cost of capital) as discount rates at 12%.
Years Start CF Growth Rate
1-3 $100,000 2%
4-6 $200,000 8%
7- 10 $80,000 1%
(1) What is the present value of cash flows from Year 1 to 3?
(2) What is the present value of cash flows from year 4 to 6? (Hint: Discount back to PRESENT, not year 4)
(3) What is the present value of cash flows from year 7 to 10?
(4) What is the PV of this project?