NPV Evaluation of ABC Corporation's Project

Hard Capital Budgeting Project Analysis

ABC Corporation is evaluating a new project that requires an initial investment of $2 million. The project is expected to generate cash flows of $600,000 annually for the next 5 years. After year 5, the project will have a salvage value of $500,000. The company uses a discount rate of 10% to evaluate projects.

What is the net present value (NPV) of the project? Which of the following statements is true regarding this project's financial viability?

The NPV is positive, indicating that the project is likely to add value to the company.

The NPV is zero, suggesting that the project will not affect the value of the company.

The NPV is negative, signifying that the project should be rejected.

Hint

Submitted3.7K

Correct2.9K

% Correct78%