How much could NPV be affected by a worst-case scenario of 25 percent reduction from the $3 million in expected annual cash flows on a five-year project with 10 percent cost of capital?
A) $2,843,090
B) $3,750,000
C) $4,578,825
D) $6,155,274

Question

Quizplus · Accepted Answer

The worst-case scenario reduces annual cash flows to $2.25 million. The NPV is calculated using these reduced cash flows over five years at a 10% discount rate, resulting in approximately $2,843,090.

How Much Could NPV Be Affected by a Worst-Case Scenario