Nu Things, Inc., is considering an investment in a business venture with the fol

Question

Nu Things, Inc., is considering an investment in a business venture with the following anticipated cash flow results:

EOY

Cash Flow

Assume MARR is 20% per year. Based on an external rate of return analysis:

Q) Determine the investment's worth. (Use -ve sign in your answer, if necessary)

EOY

Cash Flow

0 -$90,000 1 $22,000 2 $21,000 3 $20,000 4 $19,000 5 $18,000 6 $17,000 7 $16,000 8 $15,000 9 $14,000 10 $13,000 11 $12,000 12 $11,000 13 $10,000 14 $9,000 15 $8,000 16 $7,000 17 $6,000 18 $5,000 19 $4,000 20 $3,000

Explanation / Answer

Project is not acceptable due to negative NPV

EOY Cash Flow PVF at 20% Present Value 0 (90,000.00)       1.0000 (90,000.00) 1 22,000.00       0.8333     18,333.33 2 21,000.00       0.6944     14,583.33 3 20,000.00       0.5787     11,574.07 4 19,000.00       0.4823        9,162.81 5 18,000.00       0.4019        7,233.80 6 17,000.00       0.3349        5,693.27 7 16,000.00       0.2791        4,465.31 8 15,000.00       0.2326        3,488.52 9 14,000.00       0.1938        2,713.29 10 13,000.00       0.1615        2,099.57 11 12,000.00       0.1346        1,615.06 12 11,000.00       0.1122        1,233.72 13 10,000.00       0.0935           934.64 14     9,000.00       0.0779           700.98 15     8,000.00       0.0649           519.24 16     7,000.00       0.0541           378.62 17     6,000.00       0.0451           270.44 18     5,000.00       0.0376           187.81 19     4,000.00       0.0313           125.20 20     3,000.00       0.0261              78.25 NPV ($4,609)

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