| Year 1 | $100,000 |
| Year 2 | $150,000 |
| Year 3 | $200,000 |
a. $123,341.60
b. $450,000
c. $405,950.68
d. $372,431.81
Suppose Blue Hamster Manufacturing Inc. is evaluating a proposed capital budgeting project (project Beta) that will require an initial investment of $2,225,000. The project is expected to generate the following net cash flows:
| Year | Cash Flow |
|---|---|
| 1 | $300,000 |
| 2 | $475,000 |
| 3 | $425,000 |
| 4 | $500,000 |
Blue Hamster Manufacturing Inc.’s weighted average cost of capital is 7%, and project Beta has the same risk as the firm’s average project.
Based on the cash flows, what is Project Beta’s NPV?
a. $1,423,631
b. -$376,369
c. -$3,026,369
d. -$801,369
The Sisyphean Company is planning on investing in a new project. This will involve the purchase of some new machinery costing $410,000. The Sisyphean Company expects cash inflows from this project as detailed below:
| Year 1 | Year 2 | Year 3 | Year 4 |
|---|---|---|---|
| $200,000 | $225,000 | $275,000 | $200,000 |
The appropriate discount rate for this period is 16%.
The net present value (NPV) for this project is:
a. $540,661
b. $227,078
c. $151,385
d. $216,265
