Assume a 5-year project has a base-case NPV of $213,000, a tax rate of 34%, and a cost of capital of 14%. What will be the worst-case NPV if the annual cash flows are reduced in that scenario by $35,000 for each of the 5 years?
A) -$92,842.17
B) -$120,157.83
C) $92,842.17
D)$120,157.83

Question

Quizplus · Accepted Answer

NPV = $213,000 + (-$35,000 {(1/.14) - [1/.14(1.14⁵)]}) = $92,842.17

Assume a 5-Year Project Has a Base-Case NPV of $213,000