Revenues and other operating costs are expected to be constant over the project’s three-year life. What is the project’s NPV?

Fin 515 week 6 problems and test correct 10 mcqs devry

Project Cash Flow: Year 0: -$200,000; Year 1: $90,000; Year 2: $100,000; Year 3: $140,000
WACC: 8%

The project’s discounted payback is 4.04 years. This is calculated by comparing the present value of cash flows to determine when the cumulative present value of inflows equals the cumulative present value of outflows.

The project’s NPV is $11,473.63. This can be calculated using the Net Present Value formula which takes into account all future expected cash flows and subtracts from them any initial investment (in this case it’s a negative number). This calculation also takes into account the WACC which accounts for the opportunity cost of resources invested in a given project (8%).