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What should be the decision of the enterprise

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Reference no: EM132735186

DJ Enterprise is considering a project with an initial cost of P5,000 and net cash flows of P2,000 for the next three years. The expected abandonment cash inflows for years 0, 1, 2, and 3 are P5,000, P3,000, P2,500 and P 0. The enterprise's cost of capital is 10%.

Problem 1: Compute in three cases using Microsoft Excel

  1. NPV of project if kept for three years
  2. NPV of project if abandoned after Year 1
  3. NPV of project if abandoned after Year 2

Problem 2: What should be the decision of the enterprise considering the three cases?

Reference no: EM132735186

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