Calculation of NPV of two projects with different lives and cash flows.
1. Edmondson Electric 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 projected NPV is negative, it should be rejected.
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WACC
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10.00%
|
|
|
|
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Year:
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0
|
1
|
2
|
3
|
|
Cash flows:
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-$1,000
|
$500
|
$500
|
$500
|
2. Humboldt Inc. is considering a project that has the following cash flow and WACC data. What is the project's NPV? Note that is a project's projected NPV is negative, it should be should be rejected.
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WACC
|
9.00%
|
|
|
|
|
|
|
Year:
|
0
|
1
|
2
|
3
|
4
|
5
|
|
Cash flows:
|
-$1,000
|
$300
|
$300
|
$300
|
$300
|
$300
|