2. Diane approaches you with a plan for a project. She says, You are going to make a killing off this thing! You will make $500,000 in revenues in the next five years! This isnt your first rodeo. You know you want to see the Net Present Value (NPV) of those future cash flows before you decide the investment is worth it. So you say Im going to run the NPV on the figures with a discount rate of 8%, if it comes back positive we will move forward. What do you find? Do you move forward, why or why not? What was the final NPV? Show all work.

Total Investment = $500,000

Annual Cash Flows = $120,000

Discount Rate = 8%

Time Periods = 5

NPV = Total Investment + (Annual Cash Flows /(1 + Discount rate) ^time period)