12-11 Aerospace Dynamics will invest $110,000 in a project that will produce the following cash flows. The cost of capital is 11 percent. Should the project be undertaken? (Note that the fourth year's cash flow is negative Year Cash flow 36000 44.000 Solution: Aerospace Dynamics Year Cash FlOw PVIF at 11% Present Value $36,000 901 $32,436 44.000 812 35,728 38.000 731 27,778 (44,000 659 (28,96) 5 81000 593 48033 Present value of inflows $114,979 Present value of outflows 110.000 Net present value $4,979 The net present value is positive and the project should be undertaken CopyrightC 2005 by The McGray-Hill Companies, Inc. S-434Copyright © 2005 by The McGraw-Hill Companies, Inc. S-434 12-11. Aerospace Dynamics will invest $110,000 in a project that will produce the following cash flows. The cost of capital is 11 percent. Should the project be undertaken? (Note that the fourth year's cash flow is negative.) Year Cash Flow 1 ....................................... $36,000 2 ....................................... 44,000 3 ....................................... 38,000 4 ....................................... (44,000) 5 ....................................... 81,000 Solution: Aerospace Dynamics Year Cash Flow PVIF at 11% Present Value 1 $36,000 .901 $ 32,436 2 44,000 .812 35,728 3 38,000 .731 27,778 4 (44,000) .659 (28,996) 5 81,000 .593 48,033 Present value of inflows $114,979 Present value of outflows 110,000 Net present value $ 4,979 The net present value is positive and the project should be undertaken