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Should the firm make this investment

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Reference no: EM13972779

If Debbie's Drug Co. chooses to develop a new drug, it expects to receive cash flows of $150,000 in year 3, $300,000 in year 4, and $100,000 in year 5. The discount rate is 8%. 

1. What is the present value of the expected future cash flows?

2. Assume that this project requires a $400,000 investment today (or else the future cash flows will not happen). Should the firm make this investment? 

Reference no: EM13972779

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