Hose plc is trying to make a decision on whether to make a commitment of £800,000 now to a project with a life of seven years. At present prices the project will return net cash flows of £150,000 per annum at the year ends. Prices are not expected to remain constant and general inflation is anticipated at 6 per cent per annum. The annual net cash inflows of this project are expected to rise in accordance with general inflation. The money rate of return is 13 per cent. Advise Hose on the viability of this project. 9