Assume General Motors Has a Weighted Average Cost of Capital

Multiple Choice

Assume General Motors has a weighted average cost of capital of 9%. GM is considering investing in a new plant that will save the company $20 million over each of the first two years, and then $10 million each year thereafter. If the investment is $100 million, what is the net present value (NPV) of the project?

A) $25.8 million
B) $31.6 million
C) $28.7 million
D) $27.3 million