Question

Hamilton Control Systems will invest $90,000 in a temporary project that will generate the following cash inflows: Year Cash Flow $23,000 38,000 60,000 The firm will also be required to spend $15,000 to close the project at the end of the three years.

a. Compute the net present value if the cost of capital is 10 percent. (Round the intermediate calculations to the nearest whole dollar. Negative answer should be indicated by a minus sign. Round the final answer to the nearest whole dollar. Omit $ sign in your response.)

NPV $ ........

b. Should the investment be undertaken? Yes/ No

Answer 1

Year	Cash flow	× factor@ 10.00%	Present value
0	$      (90,000.00)	1.0000	$            (90,000.00)
1	$        23,000.00	0.9091	$             20,909.09
2	$        38,000.00	0.8264	$             31,404.96
3	$        60,000.00	0.7513	$             45,078.89
3	$      (15,000.00)	0.7513	$            (11,269.72)
			$                            -
			$                            -
			$                            -
			$                            -
			$                            -
			$                            -
NPV			$              (3,876.78)

NPV is -3,877

No

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