## 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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