Project Z has an initial cost of $59,518, and its expected net cash inflows are $16,750 per year for 7 years. The firm has a WACC of 14 percent, and Project Z’s risk would be similar to that of the firm’s existing assets. Calculate the net present value (NPV) of Project Z.
a. |
$12,311.11 |
|
b. |
$57,732.00 |
|
c. |
$–12,660.52 |
|
d. |
$71,829.11 |
|
e. |
$43,332.88 |
NPV = -initial investment + PV of future cash flows
Present value = Future value/(1+i)^n
i = interest rate per period
n= number of periods
=>
NPV = -59518 + 16750/1.14 + 16750/1.14^2 + 16750/1.14^3 + 16750/1.14^4 + 16750/1.14^5 + 16750/1.14^6 + 16750/1.14^7
= 12311.11
choose a)
Project Z has an initial cost of $59,518, and its expected net cash inflows are $16,750...
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