Evaluate the net present value of the proposed investment

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Reference no: EM132610395

A company is considering an investment project which involves the purchase of machinery. The project has a four year life at the end of which the machinery will be sold for £40,000. The project will result in the following cash flows:

Initial investment £120,000

Year 1 cash inflow £35,000

Year 2 cash inflow £40,000

Year 3 cash inflow £55,000

Year 4 cash inflow £30,000

The company's policy is to depreciate machinery on a straight line basis over its estimated life. The company has a cost of capital of 10%.

Question 1: The net present value of the proposed investment is:

Select one:

A. £100,000

B. £66,650

C. £26,650

D. £33,970

Reference no: EM132610395

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