Johnson Enterprises is considering a project that has the following cash flow and WACC data. What is the project's NPV? Note that if a project's projected NPV is negative, it should be rejected.
A) $98.78
B) $103.98
C) $109.45
D) $114.93

Question

Johnson Enterprises is considering a project that has the following cash flow and WACC data. What is the project's NPV? Note that if a project's projected NPV is negative, it should be rejected. 
A) $98.78 
B) $103.98 
C) $109.45 
D) $114.93

Quizplus · Accepted Answer

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

Year 0: -$500
Year 1: $150/(1+0.10) = $136.36
Year 2: $250/(1+0.10)^2 = $206.61
Year 3: $300/(1+0.10)^3 = $249.26
Year 4: $400/(1+0.10)^4 = $298.05

NPV = -$500 + $136.36 + $206.61 + $249.26 + $298.05 = $109.45

Therefore, the best choice is C, as the project has a positive NPV.

Johnson Enterprises Is Considering a Project That Has the Following