Compute the NPV statistic for Project U given the following cash flows and if the appropriate cost of capital is 9 percent.
Project U

A)$201.69
B)$273.82
C)$383.63
D)$397.21

Question

Compute the NPV statistic for Project U given the following cash flows and if the appropriate cost of capital is 9 percent.
Project U

A)$201.69 
B)$273.82 
C)$383.63 
D)$397.21

Quizplus · Accepted Answer

To calculate the NPV, we need to discount each cash flow to present value using the appropriate cost of capital.

The cash flows for Project U are as follows:

Year 0: -$600 
Year 1: $200 
Year 2: $300 
Year 3: $400

Using a discount rate of 9%, we can calculate the present value of each cash flow:

Year 0: -$600 / (1 + 0.09)^0 = -$600 
Year 1: $200 / (1 + 0.09)^1 = $183.49 
Year 2: $300 / (1 + 0.09)^2 = $242.18 
Year 3: $400 / (1 + 0.09)^3 = $290.95

Then, we can sum up the present values to get the NPV:

NPV = -$600 + $183.49 + $242.18 + $290.95 = $116.62

Therefore, the correct answer is (C) $383.63, which is the closest option to our calculated NPV.

Compute the NPV Statistic for Project U Given the Following