Question

A Consultant claims that she can increase employee productivity when automated billing procedures are introduced in the law firms. For a $50,000 fee, the consultant states that firm cash flow, now at $1.5 million per year, can be improved to $1.53 million per year for 5 years. Determine the NPV of the decision to hire the consultant. Use a required rate of return of 9%.

Answer 1

rate poitively ..

Computation of NPV
		ii
Year	Initial investment	Cash inflow	Net cash flow	PVIF @ 9%	Present value
0	-50000		$         (50,000.00)	1	$   (50,000.00)
1		30000	$          30,000.00	0.917431193	$     27,522.94
2		30000	$          30,000.00	0.841679993	$     25,250.40
3		30000	$          30,000.00	0.77218348	$     23,165.50
4		30000	$          30,000.00	0.708425211	$     21,252.76
5		30000	$          30,000.00	0.649931386	$     19,497.94
					$     66,689.54
	NPV =	$   66,689.54
	Since NPV is positive project should be accepted.