The Companys policy is to only take on projects that will realize an annual rate of return of at least 10%. Based on this decision criterion, should the company invest in the following project?

Project 333 requires:

PVa - An initial investment of $11K,

PVb - An annual investment of $4k per year for the first 5 years

PVc1 - An annual investment of $3K per year beginning in year 6 (the end of year 5)

PVc2 - Growing each year by $3K through year 10.

With these investments, the project is expected to produce the following revenue streams:

PVd - A revenue stream of $4K every year for the first five years

PVe- A revenue stream of $8K for years 5 through 10 (six years).

PVf - A cash-out income in year 10 of $20K.

Complete the decision-making analysis by determining the Present Value of each cash flow and then determine the Net Present Value of all incomes and expenses.

Specifically,

1.Provide a clear and precise graphical representation of each cash flow, showing the multiplication factor for the cash flow that will create a Present Value sum. (MARK YOUR WORK)

2.Indicate the actual Present Value for each cash flow (MARK YOUR WORK)

Present Value:

PVa

PVb

PVc1

PVc2

PVd

PVe

PVf

3.Determine the Net Present Value of all cash flows. (MARK YOUR WORK) NPV ___________________

4.Explain what the decision should be for this project (ACCEPT or REJECT). (MARK YOUR WORK)

5.Justify your decision (MARK YOUR WORK)

If your decision was to REJECT: What value would the cash out value have to be to change the decision to ACCEPT?

If your decision was to ACCEPT: What would the value of the yearly income for the first four years need to be to change the decision to REJECT?