A factory costs $300,000. You forecast that it will produce cash inflows of $90,000 in year 1, $150,000 in year 2, and $240,000 in year 3. The discount rate is 11%.

a. What is the value of the factory? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Explanation

Some values below may show as rounded for display purposes, though unrounded numbers should be used for actual calculations.

a.

PV	=	C1 / (1 + r)1 + C2 / (1 + r)2 + C3 / (1 + r)3
	=	$90,000 / 1.11 + $150,000 / 1.112 + $240,000 / 1.113
	=	$__________

Value of factory	=	PV of cash inflows Cost
	=	$________ 300,000
	=	$________
b. Is the factory a good investment? Yes No

b.

Since the PV of the cash inflows exceeds the cost, the factory is a good investment.

Calculator computations:

CF0	=	300,000
CO1	=	90,000 FO1 = 1
CO2	=	150,000 FO2 = 1
CO3	=	240,000 FO3 = 1

I = 11

CPT NPV = __________