Question
XYZ is considering undertaking the pear project, which is a 3-year project with expected cash flows that are not conventional. Cash flows are expected to
XYZ is considering undertaking the pear project, which is a 3-year project with expected cash flows that are not conventional. Cash flows are expected to be $22,000 today, $37,000 in 1 year, $52,000 in 2 years, and $61,000 in 3 years. The weighted-average cost of capital for XYZ is 16.54 percent. Which one of the following assertions about the net present value (NPV) of the pear project is true?
| a. | The NPV of the pear project equals an amount that is less than or equal to $5.00 |
| b. | The NPV of the pear project equals an amount that is greater than $5.00 but less than $5.00 |
| c. | Even though the pear projects expected cash flows are not conventional and even though it is possible to compute the NPV of a project with expected cash flows that are not conventional, the NPV of the pear project can not be computed |
| d. | The NPV of the pear project equals an amount that is equal to or greater than $5.00 |
| e. | The NPV of the pear project cannot be computed, because the projects expected cash flows are not conventional and it is impossible to compute the NPV of a project with expected cash flows that are not conventional |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started