Answers
| a) | ||||
| Year | Cash Flow | PV Factor At 12% | PV of cash flows | |
| 0 | $ -2,05,000 | 1 | $ -2,05,000 | |
| 3 | $ 53,000 | 0.71178 | $ 37,724 | |
| 4 | $ 53,000 | 0.635518 | $ 33,682 | |
| 5 | $ 53,000 | 0.567427 | $ 30,074 | |
| 6 | $ 53,000 | 0.506631 | $ 26,851 | |
| 7 | $ 53,000 | 0.452349 | $ 23,975 | |
| 8 | $ 53,000 | 0.403883 | $ 21,406 | |
| 9 | $ 53,000 | 0.36061 | $ 19,112 | |
| 10 | $ 53,000 | 0.321973 | $ 17,065 | |
| NPV | $ 4,889 | |||
| Net present value =$4889 | ||||
| b) | Since, the NPV is positive, the project should be undertaken. | |||
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