The Seminole Production Company is analyzing the investment in a new line of business machines. The initial outlay required is $35 million. The net cash flows expected from the investment are as follows:

Year Net Cash Flow (Million)

1 $5 2 8 3 15 4 20 5 15 6 10 7 4 The firm’s cost of capital (used for projects of average risk) is 15 percent.

a. Compute the net present value of this project assuming it possesses average risk? Q-698