Project X costs $1,000, its expected cash inflows are $500 per year for 3 years, and...

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Project X costs $1,000, its expected cash inflows are $500 per year for 3 years, and...

Project X costs $1,000, its expected cash inflows are $500 per year for 3 years, and its WACC is 10%. What is the project’s NPV? Show calculation. Would you accept the project?

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Answer 1

Answer #1

NPV = Present Value of future cash inflow discounted at WACC - cost

NPV = 500/(1+0.1)^1 + 500/(1+0.1)^2 + 500/(1+0.1)^2 - 1000

NPV = $ 243.43 Answer

Since the NPV of the project is positive, we will accept the project.

Please let me know in case you have any queries and I will be happy to assist you.

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Answer 2

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