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 projected NPV can be negative,in which case it will be rejected. $$\begin{array} { l c c c c }
\text { WACC: } & { 10.00 \% } \
\text { Year } & 0 & 1 & 2 & 3 \
\hline \text { Cash flows } & - \$ 1,050 & \$ 500 & \$ 400 & \$ 300
\end{array}$$
A) -$47.38
B) -$39.09
C) -$29.61
D) -$40.27
E) -$39.48

Question

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 projected NPV can be negative,in which case it will be rejected. $$\begin{array} { l c c c c } 
\text { WACC: } & { 10.00 \% } \
\text { Year } & 0 & 1 & 2 & 3 \
\hline  \text { Cash flows } & - \$ 1,050 & \$ 500 & \$ 400 & \$ 300
\end{array}$$
A) -$47.38
B) -$39.09
C) -$29.61
D) -$40.27
E) -$39.48

Quizplus · Accepted Answer

The Net Present Value (NPV) is calculated by discounting the future cash flows back to their present value and then subtracting the initial investment. Using the given WACC of 10% as the discount rate, the NPV can be calculated as follows:$$ NPV = -\$1,050 + \frac{\$500}{(1+0.10)^1} + \frac{\$400}{(1+0.10)^2} + \frac{\$300}{(1+0.10)^3} $$$$ NPV = -\$1,050 + \frac{\$500}{1.10} + \frac{\$400}{1.21} + \frac{\$300}{1.331} $$$$ NPV = -\$1,050 + \$454.55 + \$330.58 + \$225.39 $$$$ NPV = -\$1,050 + \$1,010.52 $$$$ NPV = -\$39.48 $$Therefore, the correct answer is E) -$39.48.

Warnock Inc A) -$4738 B) -$39

Warnock Inc A) -$4738
B) -$39