Soni C. Boom, the eccentric CEO of Echo Lab. decides it’s ti…
Soni C. Boom, the eccentric CEO of Echo Lab. decides it’s time to develop sonar equipment for undersea exploration. This project is expected to run forever. Starting immediately, the company must spend $11 billion in cash each year (i.e., the first cash flow out is at t=0). Due to technological advances, that $11 billion is expected to remain constant forever (i.e., will not grow). In three years, the company will begin to sell the undersea sonar equipment. Starting at year 3, Echolab will receive $15 billion in cash and that amount will grow at 4% per year, forever. The interest rate is 18% per year (compounded annually). What is the net present value of this project today? Answer format: $XX.XX with the $ and decimal and no leading 0’s.