Question

plz help with the correct ans and steps if possible

Orange Valley, which currently operates a(n) coffee shop, is considering project A, which would involve opening a(n) laser tag center. For most of its existence, Orange Valley has operated a(n) coffee shop, laser tag center, and ropes course. Project A would require an initial investment of 6,062 dollars and is expected to produce annual cash flows of 732 dollars each year forever with the first annual cash flow expected in 1 year. What is the NPV of project A based on the information in this paragraph and the following table and applying the pure play approach to determining a project's cost of capital? WACC Line of business Firm coffee shop 10.47 percent Orange Valley Platinum Water 13.06 percent laser tag center 14.65 percent Green Forest ropes course coffee shop, laser tag center, and 17.24 percent Silver Sun ropes course Number

Answer 1

NPV = Present value of cash inflows - Present value of cash outflows

= 732/13.06% - 6062

= -$457.0995

i.e. -$457.10