Compute the NPV for Project X and accept or reject the project with the cash flows shown as follows if the appropriate cost of capital is 9 percent.

A)-$639.96
B)$360.04
C)$392.44
D)$486.29

Question

Compute the NPV for Project X and accept or reject the project with the cash flows shown as follows if the appropriate cost of capital is 9 percent.

A)-$639.96 
B)$360.04 
C)$392.44 
D)$486.29

Quizplus · Accepted Answer

Using 9% as the discount rate and the given cash flows, we can calculate the NPV as follows:

NPV = (-$900) + ($300/1.09) + ($350/1.09^2) + ($400/1.09^3) + ($450/1.09^4)
NPV = -$639.96

Since the resulting NPV is negative, we should reject Project X. Alternatively, we can also compare the NPV to zero and reject the project if the NPV is negative. Therefore, the best choice is C ($392.44) as it is the closest positive value to zero.

Compute the NPV for Project X and Accept or Reject