Brett Dunlop is seeking part-time employment while he attends school. He is considering purchasing technical equipment that will enable him to start a small training services company that will offer tutorial services over the Internet. Brett expects demand for the service to grow rapidly in the first two years of operation as customers learn about the availability of the Internet assistance. Thereafter, he expects demand to stabilize. The following table presents the expected cash flows.

Year of Operation	Cash Inflow			Cash Outflow
2015	$	14,200		$	9,700
2016		20,000			11,200
2017		22,800			12,600
2018		22,800			12,600

     In addition to these cash flows, Mr. Dunlop expects to pay $20,300 for the equipment. He also expects to pay $2,900 for a major overhaul and updating of the equipment at the end of the second year of operation. The equipment is expected to have a $1,400 salvage value and a four year useful life. Mr. Dunlop desires to earn a rate of return of 12 percent. (PV of $1 and PVA of $1) (Use appropriate factor(s) from the tables provided.)

Required:

a.	Calculate the net present value of the investment opportunity. (Negative amount should be indicated by a minus sign. Round intermediate calculations and final answer to 2 decimal places.)

Answer rating: 100% (QA)

NPV calc... View the full answer