Consider the following cash flow series over the twenty-year period of an engineering project.

N.B. The salvage of this project at the end of its life is negligible.

End of year 0 1 2 3 ... 20

Cash Flows ($): 5,000,000 1,000,000

1,000,000

1,000,000 .1,000,000

Assuming the interest rate at 18%, compounded annually:

a) Calculate the net present value of the project (present worth of 18% for 20 years of 5.3527). (10 marks)

b) Determine whether or not to proceed with the project. Give the reason(s) for your advice. (10 marks)