You plan to invest $150,000 in a retail business. The projected 10-year cash flows are as follows:

Question:

Year 1 ……………………………. $20,000

Year 2 ……………………………. $21,000

Year 3 ……………………………. $22,000

Year 4 ……………………………. $24,000

Year 5 ……………………………. $30,000

Year 6 ……………………………. $35,000

Year 7 ……………………………. $40,000

Year 8 ……………………………. $45,000

Year 9 ……………………………. $50,000

Year 10 …………………………… $55,000

In the 10th year, the business will be sold for $100,000. The cost of capital is 12%.

Use this information to calculate the following for the project:

a) Present value

b) Net present value

c) Internal rate of return

Net Present Value
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