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Net Present Value Method Problem

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11 Aerospace Dynamics will invest $110,000 in a project that will produce the following cash flows. The cost of capital is 11 percent. Should the project be undertaken? (Note that the fourth year's cash flow is negative.)

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 calculate the net present value and make the accept/reject decision

Solution Preview

In order to make a decision, we need to calculate the NPV of the project. If the NPV is positive, the project can be accepted else ...

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