Your company is evaluating an investment opportunity that will require an initial cash outlay of $10,000. It is anticipated that the investment will generate $2,000 in added annual revenues for 10 years. The cost of capital for the project is 10%.

Examples of cash flow considerations: (based on the project described above)

For each of the project details provided below, indicate whether

1) It should be included in calculating the companys NPV for the project, and

2 ) How the data should be included (as part of the initial investment, the projects cash flows, or interest rate)

a. As a maintenance project, the projects risk will be 3% lower than the typical investment for the company.

b. The company will need to pay maintenance costs of $500 a year.

c. $5,000 of the initial investment is for a piece of equipment that the company owns and would not otherwise use.

d. Closing the project will cost the company an additional $3,000 in the final year of the project