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Project acceptance

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Aerospace Dynamics will invest $110,000 in a project that will produce the following cash flows. The cost of capital is 13 percent. Should the project be undertaken? (Note that the fourth year's cash flow is negative.) Why or why not?

Year Cash Flow
1 $36,000
2 44,000
3 38,000
4 (44,000)
5 81,000

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Solution Summary

The solution explains how to decide if the project should be undertaken

Solution Preview

In order to make the decision we calculate the NPV of the project.
NPV = PV of cash ...

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