Brett Dunlop is seeking part-time employment while he attends school. He is considering purchasing technical equipment that will enable him to start a small training services company that will offer tutorial services over the Internet. Brett expects demand for the service to grow rapidly in the first two years of operation as customers learn about the availability of the Internet assistance. Thereafter, he expects demand to stabilize. The following table presents the expected cash flows.

Year of Operation

Cash Inflow

Cash Outflow

2015

$

12,800

$

8,200

2016

19,700

11,600

2017

21,000

13,300

2018

21,000

13,300

In addition to these cash flows, Mr. Dunlop expects to pay $20,500 for the equipment. He also expects to pay $2,800 for a major overhaul and updating of the equipment at the end of the second year of operation. The equipment is expected to have a $1,400 salvage value and a four year useful life. Mr. Dunlop desires to earn a rate of return of 12 percent. (PV of $1 and PVA of $1) (Use appropriate factor(s) from the tables provided.)

Required

a.	Calculate the net present value of the investment opportunity. (Negative amount should be indicated by a minus sign. Round intermediate calculations and final answer to 2 decimal places.)

b-1.

Indicate whether the investment opportunity is expected to earn a return that is above or below the desired rate of return.

	Above
	Below

b-2.

Based on your answer in Requirement b-1, should the investment opportunity be accepted.

	Accepted
	Rejected