# Calculating maximum amount that can be invested in a project

A project is expected to generate cash flows of $14,000 annually for six years plus an additional $27,000 in year 6. The cost of capital is 10%

a.What is the most you can invest in this project at time 0 and still have a positive NPV?

b.What is the most you can invest in this project at time 0 if you want to have a 15% IRR?

https://brainmass.com/business/capital-budgeting/calculating-maximum-amount-invested-project-346212

#### Solution Preview

Please refer attached file for better clarity of tables and formulas.

Solution:

a. What is the most you can invest in this project at time 0 and still have a positive NPV?

Let us see cash flows associated with the project

Year End Cash flows PV Factor @10% PV of cash flow

n Ci PVF=1/(1+10%)^n Ci*PVF

1 14000 0.9091 12727.27

2 14000 0.8264 11570.25

3 ...

#### Solution Summary

The solution describes the steps to calculate maximum amount that can be invested in a project so that given criteria is satisfied.