Barry Company is considering a project that has the following cash flow and WACC data.What is the project's NPV? $\begin{array}{cccc}
\text { WACC } &10.00 \% \
\text { Year: } & 0 & 1 & 2 & 3 & 4 & 5 \
\hline \text {Cash flows: } &-\$ 1,200 & \$ 400 & \$ 395 & \$ 390 & \$ 385 & \$ 380
\end{array}$
A)$253.81
B)$282.01
C)$310.21
D)$341.23

Question

Barry Company is considering a project that has the following cash flow and WACC data.What is the project's NPV? $\begin{array}{cccc}
 \text { WACC } &10.00 \% \
 \text { Year: } & 0 & 1 & 2 & 3 & 4 & 5 \
\hline  \text {Cash flows: } &-\$ 1,200 & \$ 400 & \$ 395 & \$ 390 & \$ 385 & \$ 380
\end{array}$
A)$253.81
B)$282.01
C)$310.21
D)$341.23

Quizplus · Accepted Answer

The Net Present Value (NPV) is calculated by discounting each of the project's cash flows back to its present value using the Weighted Average Cost of Capital (WACC) and then summing those present values. The formula for NPV is: $$NPV = \sum \frac{CF_t}{(1 + WACC)^t}$$ where $CF_t$ is the cash flow at time $t$, and $WACC$ is the Weighted Average Cost of Capital. Using the given WACC of 10% and the cash flows, the NPV calculation is as follows: $$NPV = -\$1,200 + \frac{\$400}{(1 + 0.10)^1} + \frac{\$395}{(1 + 0.10)^2} + \frac{\$390}{(1 + 0.10)^3} + \frac{\$385}{(1 + 0.10)^4} + \frac{\$380}{(1 + 0.10)^5}$$ $$NPV = -\$1,200 + \$363.64 + \$326.45 + \$292.12 + \$261.22 + \$233.58$$ $$NPV = \$282.01$$ Therefore, the project's NPV is $282.01.

Barry Company Is Considering a Project That Has the Following