7. The NPV and payback period What information does the payback period provide? Suppose Omni Consumer Products's CFO is evaluating a project with the following cash inflows. She does not know the project's initial cost; however, she does know that the project's regular payback period is 2.5 years. Year Year 1 Year 2 Year 3 Year 4 Cash Flow $375,000 $500,000 $425,000 $400,000 If the project's weighted average cost of capital (WACC) is 7%, what is its NPV? O $334,182 O $422,125 O $299,005 O $351,771

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Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
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7. The NPV and payback period
What information does the payback period provide?
Suppose Omni Consumer Products's CFO is evaluating a project with the following cash inflows. She does not know the project's initial cost; however,
she does know that the project's regular payback period is 2.5 years.
Year
Year 1
Year 2
Year 3
Year 4
Cash Flow
$375,000
$500,000
$425,000
$400,000
If the project's weighted average cost of capital (WACC) is 7%, what is its NPV?
O $334,182
O $422,125
O $299,005
O $351,771
Transcribed Image Text:7. The NPV and payback period What information does the payback period provide? Suppose Omni Consumer Products's CFO is evaluating a project with the following cash inflows. She does not know the project's initial cost; however, she does know that the project's regular payback period is 2.5 years. Year Year 1 Year 2 Year 3 Year 4 Cash Flow $375,000 $500,000 $425,000 $400,000 If the project's weighted average cost of capital (WACC) is 7%, what is its NPV? O $334,182 O $422,125 O $299,005 O $351,771
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