Corp fin- how to calculate terminal value for this project?

Delilah12's picture
Rank: Orangutan | 267

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?

Comments (2)

Nov 15, 2017

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.

    • 1
Nov 16, 2017