Question

Anderson Systems 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 expected NPV is negative, it should be rejected. WACC: 9.00% Year 0 1 2 3 Cash flows (-$1,000) $500 $500 $500

Answer 1

Answer:

$265.65

Step-by-step explanation:

Given :

WACC: 9.00%

Year 0 1 2 3 Cash flows (-$1,000) $500 $500 $500

The NPV is calculated thus :

Initial cashflow + Σ additional cash flows / (1 + r)

Rate, r = 9% = 0.09

(1 + r) = (1 + 0.09) = 1.09

NPV = - 1000 + (500 / (1.09)¹ + (500 / 1.09)² + (500 / (1.09)³

NPV = - 1000 + 458.71559 + 420.83999 + 386.09174

NPV = 265.64732

NPV = 265.65 (2 DECIMAL PLACES)