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Consider the following investment proposal for a 6-year project.

The investment has an upfront cost of $1,500,000.

The proposal is expected to generate cash inflows for 6 years according to the following schedule: Year 1: $750,000; Year 2: $1,500,000; Year 3: $2,000,000; Year 4: $1,250,000; Year 5: $1,000,000; Year 6: $500,000.

Each year of operation you must also pay the cost of labour attached to the project – a cash outflow of $750,000 per year.

You have estimated that the appropriate discount rate for the project is 11% per annum.

Answer rating: 100% (QA)

To calculate the NPV we discount the cash inflows and outflows to their present value usi... View the full answer