Micro Systems is evaluating a $50,000 project with the following cash flows. Years Cash Flows 1 ................................$

Question:

Micro Systems is evaluating a $50,000 project with the following cash flows.

Years Cash Flows

1 ................................$ 9,000

2 ................................12,000

3 ................................18,000

4 ................................16,000

5 ................................24,000

The coefficient of variation for the project is .726.

Based on the following table of risk-adjusted discount rates, should the project be undertaken? Select the appropriate discount rate and then compute the net present value.

Coefficient of Variation Discount Rate

0-.25 .......................................6%

.26-.50 ....................................8

.51-.75 ...................................12

.76-1.00 ..................................16

1.01-1.25 ................................20

Net Present Value
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