firm is trying to decide whether to invest in a new Yur The initial cash outlay will total $250,000 over two years. The firm expect too wing project opportunity based on information. The initial cash immediately and the final $50,000 in one year's time. The company predicts that ings of $50,000, $100,000, $200,000, and $75,000 pe tarting in Year 2. The required rate of return is 12%, and the expected rateof project will generate a stream of earni per year, feof the project is forecast to remain steady at 3%. Should you invest in this ove r the li project? Year inflow outflow Net Discount factor 200000 200000 50000 50000 50000 100000O 200000 75000 50000 100000 200000 75000 003 Required rate of return (r)-12% Inflation rate (p)-3% Discount factor = 1/(1 + r + p)' I find it easier to understand Future Value-FV-PW1 If I invest a sum of money PV I expect to get a return of PV(1-+i) after one year, pv(1+i(1+) after 2 years etc. Converting this formula to show PV gives: Use this formula with FV equal to Net Flow and using the included inflation rate calculate the NPV column -if the total of NPV is positive then you should proceed with the pro ect