Question

Evaluating cash flows with the NPV method The net present value (NPV) rule is considered one of the most common and preferred criteria that generally lead to good investment decisions. Consider this case: Suppose Hungry Whale Electronics is evaluating a proposed capital budgeting project (project Alpha) that will require an initial Investment of $500,000. The project is expected to generate the following net cash flows: Year Year 1 Year 2 Year 3 Year 4 Cash Flow $350,000 475,000 400,000 475,000 Hungry Whale Electronics's weighted average cost of capital is 9%, and project Alpha has the same risk as the firm's average project. Based on the cash flows, what is project Alpha's net present value (NPV)? (Note: Do not round your intermediate calculations.) $996,215 $1,341,274 $866,274 $1,366,274 Making the accept or reject decision Hungry Whale Electronics's decision to accept or reject project Alpha is independent of its decisions on other projects. If the firm follows the NPV method, it should project Alpha.

Answer 1

i calculation year PUF PU و of novo Cashflow (500000) 350000 475000 . وا (500000) 321090 399760 308880 33bugo 0.9174 0.8416 0.7722 0.708u کرا 400000 475000 و Net prosa value 866200 ~866274) cu Difference is due to prosent val factors since Nou is is tve, Hince tve, hince oroject a accept the project the NPV calculation colill take into account not 'y the project's cash flows but also the timing of cash inflows and outflows consequently project is could have a larger nou than project A has larger cash inflows