Answer:
The correct answer is:
no, because net present value is –$9,000 (a.)
Explanation:
The aim of investments normally is to yield profit, and this means that the return on investments should be greater than the amount invested, hence yielding a positive (+) net value. In this example, the amount to be invested is $150,000 and the return on investment (present value of the future cash flows) is expected to be $141,000.
The net value of the investment is calculated as:
Net value = Future cash flows - amount to be invested
Net value = 141,000 - 150,000 = -$9,000
This means that the total return on the original invested is less than the original investment by $9,000, which is a loss, therefore the company should not invest in the project.
