Question

If a company has a required rate of return of 15%, should the following project be accepted based on these expected cash flows below?Year 0 1 2 3 4 5 6 Cash Flow (274,000) 68,000 73,000 76,500 78,000 82,500 77,000 Please explain why or why not the company should move forward with this endeavor.

Answer 1

Yes

Step-by-step explanation:

In order for deciding whether the company should forward or not, we have to find out the net present value which is shown below:

Year Cash flows Discount factor Present value

0 -274000 1 -274000

1 68000 0.8696 59130.43

2 73000 0.7561 55198.49

3 76500 0.6575 50299.99

4 78000 0.5718 44596.75

5 82500 0.4972 41017.08

6 77000 0.4323 33289.22

Total present value 283531.97

Net present value 9531.97

Since the net present value comes in positive so the project should be accpeted