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Problem 3
Problem 3. Project X costs $1,000, its expected cash inflows are $500 per year for 4 years, and its WACC is 8%. What is the project's NPV?
Expert Solution
To calculate the NPV of the project, we will use the following formula-
NPV = cash outflow - pv of cash inflows
NPV = -$1,000 + $500/1.08 + $500/(1.08)2 + $500/(1.08)3 + $500/(1.08)4
NPV = $656.06342
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