Assume a 5-year project has a base-case NPV of $213,000,a tax rate of 34%,and a cost of capital of 14%.What will be the worst-case NPV if the annual after-tax cash flows are reduced in that scenario by $35,000 for each of the 5 years?
A) −$92,842.17
B) −$120,157.83
C) $92,842.17
D) $120,157.83

Question

Quizplus · Accepted Answer

NPV = $213,000 + (−$35,000 {(1 / 0.14) − [1 / 0.14(1.14⁵)]}) = $92,842.17

Assume a 5-Year Project Has a Base-Case NPV of $213,000,a