Question

Anderson Systems is considering a project that has the following cash flow and WACC data. What is the project's NPV? Note that if a project's projected NPV is negative, it should be rejected.

WACC:	11.00%
Year	0	1	2	3
Cash flows	-$1,000	$500	$500	$500

a. 0241.82

b. 0259.57

c. 0195.23

d. 0257.35

e. 0221.86

Answer 1

Present value of inflows=cash inflow*Present value of discounting factor(rate%,time period)

=500/1.11+500/1.11^2+500/1.11^3

=$1221.86

NPV=Present value of inflows-Present value of outflows

=1221.86-1000

=$221.86(Approx).