Answer:
B
Explanation:
to determine of the investor would pursue the project, we need to determine the value of the net present value
Net present value is the present value of after-tax cash flows from an investment less the amount invested.
NPV can be calculated using a financial calculator
Only projects with a positive NPV should be accepted. A project with a negative NPV should not be chosen because it isn't profitable.
When choosing between positive NPV projects, choose the project with the highest NPV first because it is the most profitable.
Cash flow in year 0 = $-200,000
Cash flow in year 1 - 14 = 20,000
Cash flow in year 15 = 20,000 + $350,000
I = 15%
NPV = -40,039.53
The npv is negative and the project should not be undertaken
To find the NPV using a financial calculator:
1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.
2. after inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.
3. Press compute
-40,039.53
