Question

A company is considering a project that has the following cash flows: -1200 in year 0, 400 in year 1, 425 in year 2, 450 in year 3, and 475 in year 4. The WACC is 14%. What is the project’s NPV?

A $45.84

B $41.25

C $50.93

D $56.59

E $62.88

Answer #1

Answer E ($62.88)

NPV = CF 0 + CF 1 * (1/1.14^1) + CF 2 * (1/1.14^2) + CF 3 * (1/1.14^3) + CF 4 * (1/1.14^4)

= ($1200) + 400 * 0.877 + 425*0.7695 = 450 * 0.6750 + 475 * 0.5921

= $62.88

Another way

Year | CI | PVF @ 14% | PVCI |

1 | $400.00 | 0.8772 | $ 350.88 |

2 | $425.00 | 0.7695 | $ 327.02 |

3 | $450.00 | 0.6750 | $ 303.74 |

4 | $475.00 | 0.5921 | $ 281.24 |

Total | $1,262.88 | ||

PVCO | 1200 | ||

NPV | $ 62.88 |

Boca Center Inc. is considering a project that has the following
cash flow and WACC data. What is the project's NPV? Note that a
project's expected NPV can be negative, in which case it will be
rejected.
WACC:
14.00%
Year
0
1
2
3
4
Cash flows
-$1,200
$400
$425
$450
$475
Group of answer choices
62.88
41.25
45.84
50.93
56.59
103.95
110.02
36.65
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