Project- Establishing a chloromethane plant in Gujrat,India
Cost of debt 8% After tax cost of debt 6% Cost of Equity 13% WACC 7.8%
Cash Outflow Year 1- (150) CF Year 2- 0 CF Year 3- 18 CF Year 4- 24 CF Year 5- 39 CF Year 6-39 CF Year 7-39
The plant life is 20 years. If I have to calculate the NPV, how to find the terminal value from year 6?
If the plant has a life of 20 years, there is no point in calculating a terminal value. Terminal value assumes that the cash flows will be produced in to perpetuity.
Forecast the cash flows out for 20 years and discount those to calculate your NPV.
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