Business, 08.07.2021 15:50 Bettie55

Suppose Blue Hamster Manufacturing Inc. is evaluating a proposed capital budgeting project (project Beta) that will require an initial investment of $3,225,000. The project is expected to generate the following net cash flows: Year Cash Flow
Year 1 $275,000
Year 2 $475,000
Year 3 $425,000
Year 4 $400,000

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?

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Answer from: andybiersack154

Answer and Explanation:

The computation of the net present value is shown below:

Year Cash flows Discount factor at 7% Present value

0 -$3,225,000 1 -$3,225,000

1 $275,000 0.934579439 $257,009.3458

2 $475,000 0.873438728 $414,883.3959

3 $425,000 0.816297877 $346,926.5977

4 $400,000 0.762895212 $305,158.0848

Net present value -$1,901,022.576

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Answer from: Quest

1 all nations face the problem of scarcity because there are limited resources and unlimited wants. nations do not have enough factors of production to produce everything that their population wants. entrepreneurial resources initiate businesses to make new goods and services; labor resources produce goods and services.

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