Provide application maintenance

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Reference no: EM13951626

A proposed software application development project is expected to cost $200,000 and to be completed in the current year (Year 0).

Over the following four years the application's benefits will provide inflows of cash, while the costs to provide application maintenance, ongoing operations, and support (MOOS) will require outflows of cash. The expected cash flows are:

	*Year 0*	*Year 1*	*Year 2*	*Year 3*	*Year 4*
Total Cash Inflows	$0	$150,000	$200,000	$250,000	$300,000
Total Cash Outflows	$200,000	$85,000	$125,000	$150,000	$200,000
Net Cash Flow	($200,000)	$65,000	$75,000	$100,000	$100,000

The discount rate set by management is 8%. The discount rate is the minimum return the organization would expect from a project if the organization were to make an equivalent investment in an opportunity of similar risk.

1. What is the net present value (NPV) for this project after 4 years of operation? Support your answer.

2. Would you invest in this project? Explain fully.

Reference no: EM13951626

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