Ellmann Systems is considering a project that has the following cash flow and cost of capital (r) data.What is the project's NPV? Note that if a project's expected NPV is negative, it should be rejected. $$\begin{array} { l c c c c }
\text { r: } &{ 90 \% } & & \
\text { Year } & 0 & 1 & 2 & 3 \
\hline \text { Cash flows } & - \$ 1,000 & \$ 500 & \$ 500 & \$ 500
\end{array}$$
A) $265.65
B) $278.93
C) $292.88
D) $307.52
E) $322.90

Question

Ellmann Systems is considering a project that has the following cash flow and cost of capital (r) data.What is the project's NPV? Note that if a project's expected NPV is negative, it should be rejected. $$\begin{array} { l c c c c } 
\text { r: } &{ 90 \% } & & \
\text { Year } & 0 & 1 & 2 & 3 \
\hline \text { Cash flows } & - \$ 1,000 & \$ 500 & \$ 500 & \$ 500
\end{array}$$
A) $265.65
B) $278.93
C) $292.88
D) $307.52
E) $322.90

Quizplus · Accepted Answer

The NPV is calculated using the formula: NPV = ∑ (Cash flow / (1 + r)^t) - Initial investment. For this project: NPV = (-1000) + (500 / 1.9) + (500 / 1.9^2) + (500 / 1.9^3) = $265.65.

Ellmann Systems Is Considering a Project That Has the Following