Question

1.     What is the NPV of the following project?
Year	A
0	-1,000
1	200
2	500
3	500
The WACC for the project is 10 percent.

Answer 1

NPV :
NPV = PV of Cash Inflows - PV of Cash Outflows
If NPV > 0 , Project can be accepted
NPV = 0 , Indifference point. Project can be accepted/ Rejected.
NPV < 0 , Project will be rejected.

Year	CF	PVF @10 %	Disc CF
0	$   -1,000.00	1.0000	$   -1,000.00
1	$        200.00	0.9091	$        181.82
2	$        500.00	0.8264	$        413.22
3	$        500.00	0.7513	$        375.66
NPV			$        -29.30

PVF(r%, n) = 1 / ( 1 + r)^n
r = Int rate per period
n = No. of periods

As it has -ve NPV, Project will be rejected.