Spreadsheet Exercise
The Drillago Company is involved in searching for locations in which to drill for oil. The firm’s current project requires an initial investment of $15 million and has an estimated life of 10 years. The expected future cash inflows for the project appear in the following table.
| Year | Cash inflows |
|---|---|
| 1 | $ 600,000 |
| 2 | 1,000,000 |
| 3 | 1,000,000 |
| 4 | 2,000,000 |
| 5 | 3,000,000 |
| 6 | 3,500,000 |
| 7 | 4,000,000 |
| 8 | 6,000,000 |
| 9 | 8,000,000 |
| 10 | 12,000,000 |
The firm’s current cost of capital is 13%.
To Do
Create a spreadsheet to answer the following questions.
Calculate the project’s net present value ...
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