Anderson Systems is considering a project that has the following cash flow and WACC data.What is the project's NPV? Note that if a project's expected NPV is negative, it should be rejected.
A)$265.65
B)$278.93
C)$292.88
D)$307.52
E)$322.90

Question

Quizplus · Accepted Answer

To calculate the NPV, we need to first calculate the present value of each cash flow using the formula PV = CF/(1+r)^t, where CF is the cash flow, r is the discount rate (which is equal to the WACC in this case), and t is the time period.

Year 0: -500,000
Year 1: 100,000/(1+0.10)^1 = 90,909.09
Year 2: 150,000/(1+0.10)^2 = 124,793.39
Year 3: 200,000/(1+0.10)^3 = 160,735.01
Year 4: 200,000/(1+0.10)^4 = 133,590.76

Now we can sum up the present values of each cash flow to get the NPV:
NPV = -500,000 + 90,909.09 + 124,793.39 + 160,735.01 + 133,590.76 = $265.65

Since the NPV is positive, the project should be accepted.

Anderson Systems Is Considering a Project That Has the Following