Patterson Co.is considering a project that has the following cash flow and cost of capital (r) data.What is the project's NPV? Note that a project's expected NPV can be negative, in which case it will be rejected. $$\begin{array} { l c c c c }
r:& 10.00 \% & & & \
\text { Year } & 0 & 1 & 2 & 3 \
\hline \text { Cash flows } & - \$ 950 & \$ 500 & \$ 400 & \$ 300
\end{array}$$
A) $54.62
B) $57.49
C) $60.52
D) $63.54
E) $66.72

Question

Patterson Co.is considering a project that has the following cash flow and cost of capital (r) data.What is the project's NPV? Note that a project's expected NPV can be negative, in which case it will be rejected. $$\begin{array} { l c c c c } 
r:& 10.00 \% & & & \
\text { Year } & 0 & 1 & 2 & 3 \
\hline  \text { Cash flows } & - \$ 950 & \$ 500 & \$ 400 & \$ 300
\end{array}$$
A) $54.62
B) $57.49
C) $60.52
D) $63.54
E) $66.72

Quizplus · Accepted Answer

The NPV is calculated by discounting the future cash flows to the present value using the cost of capital (10%) and then subtracting the initial investment. NPV = -950 + (500/1.1) + (400/1.1^2) + (300/1.1^3) = $60.52.

Patterson Co A) $5462 B) $57

Patterson Co A) $5462
B) $57