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: 7.75% Year 0 1 2 3 4 5 Cash flows -$1,000 $300 $300 $300 $300 $300 a. 209.86 b. 248.95 c. 205.75 d. 176.94 e. 232.49

Answer 1

Ans:NPV = PResent value of cash inflows - Present value of cash outflows

= $ 205.75 (refer table below for calculation

Option C

	Discount rate = 7.75%
Year	Present value factor =1/(1+r)^n	Present value factor (A)	Cash flows (B)	Present value of cash flows (A*B)
1	1/(1+7.75%)	0.9281	$                                                    300.00	$                    278.42
2	1/(1+7.75%)^2	0.8613	$                                                    300.00	$                    258.40
3	1/(1+7.75%)^3	0.7994	$                                                    300.00	$                    239.81
4	1/(1+7.75%)^4	0.7419	$                                                    300.00	$                    222.56
5	1/(1+7.75%)^5	0.6885	$                                                    300.00	$                    206.55
			Present value of cash inflows	$                 1,205.75
			Less: Initial outflow	$                 1,000.00
			NPV	$                    205.75