Question

Question 15 5 pts Johnson Controls has a project with a cost of $7,000 and expected cash flow stream of $2,000 at the end of year 1, $3,000 at the end of year 2, and $5,000 at the end of year 3. At a discount rate (WACC) of 10.68%, what is the net present value (NPV) of this investment? Your answer should be between 580.00 and 1342.00, rounded to 2 decimal places, with no special characters. Question 16 5 pts

Answer 1

The following is the data given in the question:

• Initial Cost = $7,000
• Cash inflow year 1 = $2,000
• Cash inflow year 2 = $3,000
• Cash inflow year 3 = $5,000
• WACC = 10.68%

To Calculate : NPV

The following is the formula for NPV:

CC, Ста NPV = -Co + +2 +...+7 1+r (1 + r) 2 7 (1 + r) - Co = Initial Investment C = Cash Flow T = Discount Rate T = Time

$2,000 $3,000 $5,000 NPV=a *(1 + 10.68%) *(1 + 10.68%)2 *(1 + 10.68%) 3

NPV = $1,807.01 + $2,448.97 + $3,687.76 – $7,000 = $943.74

Hence, the answer is 943.74