Calco is a multi-divisional firm with a weighted cost of capital of 14 percent and a risk-adjusted discount rate for its can division of 17 percent. A planned expansion in the can division requires a net investment of $170,000 and results in expected cash inflows of $42,000 a year for seven years. Should Calco invest in this expansion?
A) Yes, since NPV = $10,096
B) Yes, since NPV = $9,896
C) No, since NPV = -$5,276
D) No, since NPV = -$9,896

Question

Quizplus · Accepted Answer

The NPV is calculated using the risk-adjusted discount rate of 17% for the can division. The NPV is negative, indicating that the investment should not be made.

Calco Is a Multi-Divisional Firm with a Weighted Cost of Capital