NOTE : THIS IS TO BE SUBMITTED AS WE HAVE OUR FACE TO FACE CLASSES.

EXERCISES ON NPV

1. Anderson Systems is considering a project that has the following cash

flow and WACC data. What is the project's NPV? Note that if a
project's projected NPV is negative, it should be rejected.

WACC: 9.00%
Year 0 1 2 3
Cash flows -$1,000 $500 $500 $500

2. Tuttle Enterprises is considering a project that has the following cash

flow and WACC data. What is the project's NPV? Note that if a
project's projected NPV is negative, it should be rejected.

WACC: 11.00%
Year 0 1 2 3 4
Cash flows -$1,000 $350 $350 $350 $350

3. Harry's Inc. is considering a project that has the following cash flow
and WACC data. What is the project's NPV? Note that if a project's
projected NPV is negative, it should be rejected.

WACC: 10.25%
Year 0 1 2 3 4 5
Cash flows -$1,000 $300 $300 $300 $300 $300

4. Taggart Inc. is considering a project that has the following cash flow
data. What is the project's payback?

Year 0 1 2 3
Cash flows -$1,150 $500 $500 $500

5. Resnick Inc. is considering a project that has the following cash flow
data. What is the project's payback?

Year 0 1 2 3
Cash flows -$350 $200 $200 $200

6. Cornell Enterprises is considering a project that has the following cash

flow and WACC data. What is the project's NPV? Note that a project's
projected NPV can be negative, in which case it will be rejected.

WACC: 10.00%
Year 0 1 2 3
 Cash flows -$1,050 $450 $460 $470

7. Jazz World Inc. is considering a project that has the following cash
flow and WACC data. What is the project's NPV? Note that a project's
projected NPV can be negative, in which case it will be rejected.

WACC: 14.00%
Year 0 1 2 3 4
Cash flows -$1,200 $400 $425 $450 $475

8. Barry Company is considering a project that has the following cash flow
and WACC data. What is the project's NPV? Note that a project's
projected NPV can be negative, in which case it will be rejected.

WACC: 12.00%
Year 0 1 2 3 4 5
Cash flows -$1,100 $400 $390 $380 $370 $360

9. Last month, Lloyd's Systems analyzed the project whose cash flows are
shown below. However, before the decision to accept or reject the
project, the Federal Reserve took actions that changed interest rates
and therefore the firm's WACC. The Fed's action did not affect the
forecasted cash flows. By how much did the change in the WACC affect
the project's forecasted NPV? Note that a project's projected NPV can
be negative, in which case it should be rejected.

Old WACC: 10.00% New WACC: 11.25%

Year 0 1 2 3
Cash flows -$1,000 $410 $410 $410

10. Lasik Vision Inc. recently analyzed the project whose cash flows are
shown below. However, before Lasik decided to accept or reject the
project, the Federal Reserve took actions that changed interest rates
and therefore the firm's WACC. The Fed's action did not affect the
forecasted cash flows. By how much did the change in the WACC affect
the project's forecasted NPV? Note that a project's projected NPV can be
negative, in which case it should be rejected.

Old WACC: 8.00% New WACC: 11.25%

Year 0 1 2 3
Cash flows -$1,000 $410 $410 $410