Question

You are considering a project that has the following cash flow and WACC data. What is the project’s NPV?

WACC:	9.00%
Year:	0	1	2	3	4	5
Cash flows:	–$1,000	$300	$300	$300	$300	$300

Select one:

a. 150.62

b. 176.4

c. 166.90

d. 143.90

Answer 1

NPV of project is calculated as present value of cash inflow less present value of cash outflow
Year	Cash flow	Discount factor @ 9%		Present value
0	-1000	1.0000	1/(1.09^0)	-$1,000.00
1	300	0.9174	1/(1.09^1)	$275.23
2	300	0.8417	1/(1.09^2)	$252.50
3	300	0.7722	1/(1.09^3)	$231.66
4	300	0.7084	1/(1.09^4)	$212.53
5	300	0.6499	1/(1.09^5)	$194.98
Net present value				$166.90
Thus, net present value of project is $166.90