Question
Several companies, including Barnyard and Energy Solutions Corporation, are considering project A, which is believed by all to have a level of risk that is
Several companies, including Barnyard and Energy Solutions Corporation, are considering project A, which is believed by all to have a level of risk that is equal to that of the average-risk project at Barnyard. Project A is a project that would require an initial investment of $74,200 and then produce an expected cash flow of $100,200 in 4 years. Project A has an internal rate of return of 8.11 percent. The weighted-average cost of capital for Barnyard is 10.34 percent and the weighted-average cost of capital for Energy Solutions Corporation is 6.44 percent. What is the NPV that Energy Solutions Corporation would compute for project A?
$-849.30 (plus or minus $10) | ||
$3863.54 (plus or minus $10) | ||
$141798.30 (plus or minus $10) | ||
$-6601.70 (plus or minus $10) | ||
None of the above is within $10 of the correct answer |
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