A Consultant claims that she can increase employee productivity when automated billing procedures are introduced in...

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%.

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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.

jeff jeffy answered 1 year ago

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