Question

A company makes an initial $100,000 investment in a project. This project is projected to earn...

A company makes an initial $100,000 investment in a project. This project is projected to earn $80,000 in year one, $100,000 in year 2, $120,000 in year 3, and $200,000 in year 4. If the WACC is 10%, what is the project's present value? Round to the nesrest dollar.
Select One:
a. $282,132
b. $137,619
c. $200,000
d. $243,509
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Homework Answers

Answer #1

Correct answer a. $282,132

To calculate the present value of the project we will be using the NPV function in excel

The NPV function in excel calculated the present value by discounting the series of cash flows at the specified discount rate

=NPV (discount rate, series of cash flow)

As seen in the working below, the NPV is 382,132. We have made an initial investment of 100000 we thus have to deduct the same to get the final NPV

Net present value = 3,82,132 – 100,000

Net present value = 2,82,132

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