Warnock Inc. is considering a project that has the following cash flow and WACC

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. WACC: 10.00% Year 0 1 2 3 Cash flows -$825 $500 $400 $300




Answer a. $185.52 b. $194.79 c. $153.98 d. $181.81 e. $155.84

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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. WACC: 10.00% Year 0 1 2 3 Cash flows -$825 $500 $400 $300




WACC: 10.00% Year 0 1 2 3 Cash flows -$825 $500 $400 $300 $185.52 $194.79 $153.98 $181.81 $155.84

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WACC: 10.00% Year 0 1 2 3 Cash flows -$825 $500 $400 $300

Explanation / Answer

Years CashFlowDiscount factor Present value of cash flow

1$5000.909$454.50

2$4000.826$330.40

3$300 0.751$225.30

So total present value of cash inflow will be $ 1010.20 and cash outflow is $ 825

so, NPV=$ 1010.20-$ 825=$ 185.20

Project should be accepted

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