18 Investment Opportunity: Purchase Price Useful Life Cost of Capital Zimboozy $12,000 5 years 10.00% YEAR Cash in Cash out Net Flow $12,000 (12,000) 3,000 4,000 6,000 2,000 2,000 $ 5,000 PV ($12,000) 5,000 7,000 10,000 7,000 8,000 2,000 3,000 4,000 5,000 6,000 Data Summary of annual cash flows YEAR Cash in Cash out Net Flow NPV 5,000 7,000 10,000 7,000 8,000 $12,000 (12,000) 3,000 4,000 6,000 2,000 0 6,00021000 5,000 2,000 3,000 4,000 5,000 IRR approach to capital budgeting Input the assumed cost of capital YEAR CASH IN CASH OUT NET FLOW PV Instructions 0 $12,000 2,000 3,000 4,000 5,000 6,000 $ (12,000)($12,000) 5,000 7,000 10,000 7,000 8,000 3,000 4,000 6,000 2,000 2,000 $ 5,000 Analyze this investment opportunity and make a recommendation using the following 2 methods NPV *IRR NPV (must be 0) Invest or not