Question
The Horizon Company will invest $52,000 in a temporary project that will generate the following cash inflows for the next three years. Use Appendix B
The Horizon Company will invest $52,000 in a temporary project that will generate the following cash inflows for the next three years. Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods.
Year | Cash Flow | |||
1 | $ | 17,000 | ||
2 | 32,000 | |||
3 | 22,000 | |||
The firm will also be required to spend $11,000 to close down the project at the end of the three years.
a. Compute the net present value if the cost of capital is 9 percent. (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places.)
b. Should the investment be undertaken?
-
No
-
Yes
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