Question

Harry's Inc. is considering a project that has the following cash flow and WACC data. What is the project's NPV? Note that if a project's projected NPV is negative, it should be rejected. WACC: 13.25%

Year 0 1 2 3 4 5 Cash flows -$1,000 $300 $300 $300 $300 $300

Answer 1

NPV is calculated as follows:

Year	CF	Discount Factor	Discounted CF
0	$-1,000.00	1/(1+0.135)^0=	1	1*-1000=	$ -1,000.00
1	$      300.00	1/(1+0.135)^1=	0.881057269	0.881057268722467*300=	$      264.32
2	$      300.00	1/(1+0.135)^2=	0.776261911	0.776261910768693*300=	$      232.88
3	$      300.00	1/(1+0.135)^3=	0.683931199	0.683931198915148*300=	$      205.18
4	$      300.00	1/(1+0.135)^4=	0.602582554	0.602582554110263*300=	$      180.77
5	$      300.00	1/(1+0.135)^5=	0.530909739	0.530909739304196*300=	$      159.27
				NPV = Sum of all Discounted CF	$         42.42

NPV is 42.42 and the project should be selected because the NPV is positive