Explore BrainMass

Explore BrainMass

    Analyzing the given investment proposal

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    A project costs $19,000 and promises the following cash flows:

    Year 1 $12,500
    Year 2 $ 6,000
    Year 3 $ 3,000

    The appropriate discount rate is 15% per year. Should you invest in this project?
    Solve the problem and write a 50-100 word response explaining the results you obtained for the selected question.

    © BrainMass Inc. brainmass.com June 4, 2020, 3:12 am ad1c9bdddf

    Solution Preview

    Please refer attached file for better formatting of tables.


    Let us first calculate the PV of cash inflows

    Year Cash Inflow PV @15%
    n Cn Cn/(1+15%)^n
    1 $12,500 $10,869.57
    2 $6,000 $4,536.86
    3 $3,000 $1,972.55

    PV of cash inflows=PV=$17,378.98
    Initial Investment=Co=$19,000.00

    NPV of ...

    Solution Summary

    Solution analyzes the given investment proposal with the help of capital budgeting techniques.