Question 15 5 p Johnson Controls has a project with a cost o

Question 15 5 p Johnson Controls has a project with a cost of $7.000 and expected cash flow stream of $2,000 at the end of year 1, $3,000 at the end of year 2, and $5,000 at the end of year 3. At a discount rate (WACC) of 10.68%, what is the net present value (NPV of this investment? Your answer should be between 58000 and 1342.00, rounded to 2 decimal places, with no special characters

Solution

Net present value or NPV = 943.74

Working:

Discount rate = WACC = R = 10.68%

Present Values

Year

Cash flows

Discount factor or PV factors = Df = 1/(1+R)^Year

PV of cash flows = Cash flows x Df

0

-$7,000.00

1.000000

-$7,000.00

1

$2,000.00

0.903506

$1,807.01

2

$3,000.00

0.816322

$2,448.97

3

$5,000.00

0.737552

$3,687.76

Total of Present values = NPV =

$943.74

		Discount rate = WACC = R = 10.68%	Present Values
Year	Cash flows	Discount factor or PV factors = Df = 1/(1+R)^Year	PV of cash flows = Cash flows x Df
0	-$7,000.00	1.000000	-$7,000.00
1	$2,000.00	0.903506	$1,807.01
2	$3,000.00	0.816322	$2,448.97
3	$5,000.00	0.737552	$3,687.76
		Total of Present values = NPV =	$943.74