Compute the NPV for Project X and Accept or Reject $$\begin{array} { l l l l l l l } \text { Time: } & 0 & 1 & 2 & 3 & 4 & 5 \\\text { Cash flow: } & - 1000 & - 75 & 100 & 100 & 0 & 2000\end{array}$$

question 4

Multiple Choice

Compute the NPV for Project X and accept or reject the project with the cash flows shown as follows if the appropriate cost of capital is 9 percent. $$\begin{array} { l l l l l l l } \text { Time: } & 0 & 1 & 2 & 3 & 4 & 5 \\\text { Cash flow: } & - 1000 & - 75 & 100 & 100 & 0 & 2000\end{array}$$

• A)-$639.96
• B)$360.04
• C)$392.44
• D)$486.29

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Definitions:

Capital Budgeting

The process by which investors and managers decide which long-term projects or investments a business should undertake, based on potential profitability.

What-If Questions

Scenario-based queries used to assess the impact of potential changes or decisions in a given situation.

Base Case NPV

The Net Present Value calculated under baseline assumptions, used as a standard to evaluate the viability of an investment.

Discounted Payback

A capital budgeting method that calculates the time required to recoup the investment in a project, by taking into account the present value of expected cash flows.