Dickson Co.is considering a project that has the following cash flow and WACC data.What is the project's NPV? Note that a project's expected NPV can be negative,in which case it will be rejected.
A)$250.15
B)$277.94
C)$305.73
D)$336.31
E)$369.94

Question

Dickson Co.is considering a project that has the following cash flow and WACC data.What is the project's NPV? Note that a project's expected NPV can be negative,in which case it will be rejected. 
A)$250.15 
B)$277.94 
C)$305.73 
D)$336.31 
E)$369.94

Quizplus · Accepted Answer

To calculate the NPV, we need to discount the cash flows using the given WACC of 10%.

NPV = (-$400) + $100/(1+0.10) + $120/(1+0.10)^2 + $150/(1+0.10)^3 + $200/(1+0.10)^4

NPV = -$400 + $90.91 + $99.17 + $115.16 + $177.70

NPV = $82.94

Since the NPV is positive, the project should be accepted. Out of the given choices, option B is the closest to the calculated NPV.