Warnock 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.
A)$54.62
B)$57.49
C)$60.52
D)$63.54
E)$66.72

Question

Quizplus · Accepted Answer

To calculate the NPV, we need to discount each cash flow using the company's weighted average cost of capital (WACC).

Year | Cash flow 
0 | -$800 
1 | $200 
2 | $250 
3 | $300 
4 | $350 
WACC = 10%

NPV = -$800 + $200/(1+0.1)^1 + $250/(1+0.1)^2 + $300/(1+0.1)^3 + $350/(1+0.1)^4
NPV = -$800 + $181.82 + $206.61 + $225.97 + $241.90
NPV = $54.62

Therefore, the project's NPV is positive, so the best choice is option C.