December 2013, Q1(b) Chmura Co

Hi,

I’m looking at the solutions at where it asks you to calculate the estimated value of the Mehgam project, including the Bulud Co offer (where there’s an option to sell the enitre project).

My question is how you calculate the Present value of underlying asset (PA) where you sell the project in the course of the project (start of year 3)

Solution has that you have to sum up the present value of cash flows foregone in years 3,4 & 5.[$30,613,000 approx]. But when I add the PV for those years cash flows manually, i’m getting $20,554.6m.

Im wondering if you should up PV of NCA & Working capital figures; as wrong as that sounds