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South West Industries is considering a project which has the following cash flows: Year Cash Flow 0 ? 1 $4,000 2 3,000 3 3,000 4
South West Industries is considering a project which has the following cash flows:
| Year | Cash Flow |
| 0 | ? |
| 1 | $4,000 |
| 2 | 3,000 |
| 3 | 3,000 |
| 4 | 1,500 |
The project has a payback period of 2.5 years. The firms cost of capital is 12 percent.
- What is the projects net present value (NPV).
- What does the NPV rule advise regarding this investment opportunity?
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