3. Net present value method

Consider the case of McCall Corp.:

McCall Corp. is evaluating a proposed capital budgeting project that will require an initial investment of $132,000. The project is expected to generate the following net cash flows:

Year	Cash Flow
Year 1	$39,400
Year 2	$50,800
Year 3	$45,900
Year 4	$43,400

Assume the desired rate of return on a project of this type is 9%. What is the net present value of this project?

	$15,845.4 0
	$4, 725.40
	-$4,415.10
	$13,093 .00

Suppose McCall Corp. has enough capital to fund the project, and the project is not competing for funding with other projects. Should McCall Corp. accept or reject this project?

Reject the project

Accept the project