Suppose Blue Hamster Manufacturing Inc, is evaluation a proposed capital budgeting project (project alpha) that will require an

Question

3 years ago

15

Suppose Blue Hamster Manufacturing Inc, is evaluation a proposed capital budgeting project (project alpha) that will require an

initial investment of $500,000. The project is expected to generate the following net cash flows:
Year Cash Flow
Year 1 $325,000
Year 2 $425,000
Year 3 $450,000
Year 4 $400,000
Blue Hamster Manufacturing Inc’s weighted average cost of the capital is 10%, and project alpha has the same risk as the firm’s average project. Based on the cash flows, what is project Alpha’s net present value (NPV)?
a. $871,690
b. $1,157,991
c. $1,182,991
d. $757,991

Business