Firm W has the opportunity to invest $150,000 in a new venture. The projected cash flows from the venture are as follows.

Determine if Firm W should make the investment, assuming that:
a. It uses a 6 percent discount rate to compute NPV.
b. It uses a 3 percent discount rate to compute NPV.

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Year 0 Year 1 Year 2 Year 3 Initial investment After-tax cash flow Return of investment Net cash flow $(150,000) $5,000 $8,000 10,000 $(150,000) $5,000 $8,000 160,000