Question
Several companies, including Indigo River Industrial and Red Royal Consulting, are considering project A, which is believed by all to have a level of risk
Several companies, including Indigo River Industrial and Red Royal Consulting, 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 Indigo River Industrial. Project A is a project that would require an initial investment of 4,700 dollars and then produce an expected cash flow of 5,824 dollars in 4 years. Project A has an internal rate of return of 5.51 percent. The weighted-average cost of capital for Indigo River Industrial is 8.78 percent and the weighted-average cost of capital for Red Royal Consulting is 10.21 percent. What is the NPV that Red Royal Consulting would compute for project A?
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