Suppose Extensive Enterprises’s CFO is evaluating a project with the following cash inflows. She does not...
Suppose Extensive Enterprises’s CFO is evaluating a project with the following cash inflows. She does not know the project’s initial cost; however, she does know that the project’s regular payback period is 2.5 years.
Year Cash Flow
Year 1 $325,000
Year 2 $475,000
Year 3 $450,000
Year 4 $450,000
If the project’s weighted average cost of capital (WACC) is 9%, what is its NPV?
A. $373,161
B. $356,199
C. $305,313
D. $339,237
Homework Answers
If payback period is 2.5 years, then the intial investment must be:-
=325000+475000+(450000/2)
=1025000
NPV:-
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