Desai Industries is analyzing an average-risk project, and the following data have been developed.Unit sales will be constant, but the sales price should increase with inflation.Fixed costs will also be constant, but variable costs should rise with inflation.The project should last for 3 years, it will be depreciated on a straight-line basis, and there will be no salvage value.This is just one of many projects for the firm, so any losses can be used to offset gains on other firm projects.What is the project's expected NPV?
A)$15,925
B)$16,764
C)$17,646
D)$18,528
E)$19,455

Question

Quizplus · Accepted Answer

To calculate the expected NPV, we need to calculate the cash flows of the project for each year and discount them to present value using the firm's cost of capital. The calculations result in an expected NPV of $17,646.

Desai Industries Is Analyzing an Average-Risk Project, and the Following