Coca-Cola Amatil (CCL) has a weighted average cost of capital of 9%. CCL is considering investing in a new plant that will save the company $25 million over each of the first two years, and then $10 million each year thereafter. If the investment is $100 million, what is the net present value (NPV) of the project?

Question

Quizplus · Accepted Answer

The NPV is calculated by discounting the future cash flows at the WACC of 9% and subtracting the initial investment. The cash flows are $25 million for the first two years and $10 million thereafter. The NPV is approximately $37.5 million.

Coca-Cola Amatil (CCL) Has a Weighted Average Cost of Capital