Suppose Cold Goose Metal Works Inc. is evaluating a proposed capital budgeting project (project Beta) that will require an initial investment of $3,000,000. The project is expected to generate the following net cash flows: Year Cash Flow
Year 1 $350,000
Year 2 $450,000
Year 3 $450,000
Year 4 $450,000

Cold Goose Metal Works Inc.'s weighted average cost of capital is 8%, and project Beta has the same risk as the firm's average project. Based on the cash flows, what is project Beta's NPV?

Cold Goose Metal Works Inc.

Based on the cash flows, project Beta's NPV is negative:

= ($1,602,200).

Explanation:

a) Data and Calculations:

Initial investment in project Beta = $3,000,000

Weighted average cost of capital = 8%

Net cash flows:

Year        Cash Flow    Discount Factor   Present Value

Year 1     $350,000           0.926                  $324,100  

Year 2    $450,000           0.857                    385,650

Year 3    $450,000           0.794                    357,300

Year 4    $450,000           0.735                    330,750

Total cash inflows =                                   $1,397,800

Investment cost =                                     $3,000,000

NPV =                                                        -$1,602,200

b) Cold Goose should not pursue the investment.  The cash outflows outweigh the cash inflows by more than 50%.  The net present value of the project is negative.

im almost done gimme more time to get the answer

the first one $24,630