Homework SourseYou are evaluating a project with the following cash flows i
You are evaluating a project with the following cash flows: initial investment is $-10, and the expected cash flows for years 1 - 3 are $19, $6 and $9 (all cash flows are in millions of dollars). What is this projects NPV? The company\'s WACC is 14%.
Solution
the project should be accepted as NPV is positive at $17.352m.
| Year | cash flow | discount rate 14% | PV |
| 0 | -10 | 1 | -10 |
| 1 | 19 | (1.14)^-1=0.877 | 16.663 |
| 2 | 6 | 0.769 | 4.614 |
| 3 | 9 | 0.675 | 6.075 |
| NPV | 17.352 |
