Question # 1 An investor is being asked to invest in a project with a.pdf

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Question # 1 An investor is being asked to invest in a project with an initial investment of $3,000 with first year income of $400 increasing by $100 every year for five years. His MARR (Minimum acceptable rate of return) is 5%. If he phones you with this problem when you have no access to anything other than paper and pen, what would be your recommendation to him? Should he accept this proposal or not? Explain your answer. Solution It is given in question that initial capital outflow is $3000 and the Present value of cash Inflows are as follows. 2555.48 It is clear that Present value of total cash inflowsis less than the original investment so he should notaccept the proposal. Note:It is given in the question that minimum acceptable rate of return of investor is 5% , So we used 5% as the required rate of return and appropriately discounted the cash flows.YearCash flowPVF @5%Present Value14000.9524380.9525000.9070453.5136000.8638518.3047000.8227575.8958000.7835626. 82Present value of total cash inflows 2555.48.

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