Question
Suppose Cold Goose Metal Works Inc. is evaluating a proposed capital budgeting project (project Beta) that will require an initial investment of $3,225,000. The project
Suppose Cold Goose Metal Works 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 | $450,000 |
Year 3 | $500,000 |
Year 4 | $425,000 |
Cold Goose Metal Works Inc.s weighted average cost of capital is 10%, and project Beta has the same risk as the firms average project. Based on the cash flows, what is project Betas NPV?
A: -$2,324,593
B: -$1,937,161
C: $1,287,839
D: -$1,662,161
Cold Goose Metal Works Inc.s decision to accept or reject project Beta is independent of its decisions on other projects. If the firm follows the NPV method, it should ________ project Beta
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