Consider the case of McCall Industries:
McCall Industries is evaluating a proposed capital budgeting project that will require an initial investment of $128,000. The project is expected to generate the following net cash flows:
Year
Cash Flow
Year 1 $38,800
Year 2 $50,700
Year 3 $45,600
Year 4 $42,900
Assume the desired rate of return on a project of this type is 9%. What is the net present value of this project? (Note: Do not round your intermediate calculations.)
–$10,073.90
$4,725.40
$15,872.51
$18,304.10
Suppose McCall Industries has enough capital to fund the project, and the project is not competing for funding with other projects. Should McCall Industries accept or reject this project?
Reject the project
Accept the project
