Warnock Inc. is considering a project that has the following cash flow and WACC data. What is the project's NPV? Note that a project's expected NPV can be negative, in which case it will be rejected.
A) $54.62
B) $57.49
C) $60.52
D) $63.54
E) $66.72

Question

Warnock Inc. is considering a project that has the following cash flow and WACC data. What is the project's NPV? Note that a project's expected NPV can be negative, in which case it will be rejected. 
A) $54.62 
B) $57.49 
C) $60.52 
D) $63.54 
E) $66.72

Quizplus · Accepted Answer

To calculate the NPV, we need to discount each cash flow at the given WACC and then subtract the initial investment. In this case:

NPV = -100 + (50/1.1) + (60/1.1^2) + (70/1.1^3) + (80/1.1^4) + (90/1.1^5) 
NPV = -100 + 45.45 + 49.59 + 52.69 + 54.95 + 56.60 
NPV = $63.54

Since the NPV is positive, the project should be accepted. Therefore, the best choice is C.