Question

Nu Things, Inc., is considering an investment in a business venture with the following anticipated cash flow results:

EOY	Cash Flow
0	-$90,000
1	$22,000
2	$21,000
3	$20,000
4	$19,000
5	$18,000
6	$17,000
7	$16,000
8	$15,000
9	$14,000
10	$13,000
11	$12,000
12	$11,000
13	$10,000
14	$9,000
15	$8,000
16	$7,000
17	$6,000
18	$5,000
19	$4,000
20	$3,000

Assume MARR is 20% per year. Based on an external rate of return analysis:

Q) Determine the investment's worth. (Use -ve sign in your answer, if necessary)

Answer 1

Project is not acceptable due to negative NPV

EOY	Cash Flow	PVF at 20%	Present Value
0	(90,000.00)	1.0000	(90,000.00)
1	22,000.00	0.8333	18,333.33
2	21,000.00	0.6944	14,583.33
3	20,000.00	0.5787	11,574.07
4	19,000.00	0.4823	9,162.81
5	18,000.00	0.4019	7,233.80
6	17,000.00	0.3349	5,693.27
7	16,000.00	0.2791	4,465.31
8	15,000.00	0.2326	3,488.52
9	14,000.00	0.1938	2,713.29
10	13,000.00	0.1615	2,099.57
11	12,000.00	0.1346	1,615.06
12	11,000.00	0.1122	1,233.72
13	10,000.00	0.0935	934.64
14	9,000.00	0.0779	700.98
15	8,000.00	0.0649	519.24
16	7,000.00	0.0541	378.62
17	6,000.00	0.0451	270.44
18	5,000.00	0.0376	187.81
19	4,000.00	0.0313	125.20
20	3,000.00	0.0261	78.25
NPV			($4,609)