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A project requires an initial investment of $900,000. It is expected to generate the following cash flows over its 5-year life: Year 1: $200,000 Year
A project requires an initial investment of $900,000. It is expected to generate the following cash flows over its 5-year life:
- Year 1: $200,000
- Year 2: $250,000
- Year 3: $300,000
- Year 4: $350,000
- Year 5: $400,000
Assuming a discount rate of 9%, answer the following questions:
- Calculate the Present Value (PV) of each year’s cash flow.
- Determine the NPV of the project.
- Based on your NPV calculation, discuss whether the project is financially viable.
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