A factory costs $450,000. You forecast that it will produce cash inflows of $110,000 in year 1, $170,000 in year 2, and $280,000 in year 3. The discount rate is 12%.

A factory costs $450,000. You forecast that it will produce cash inflows of $110,000 in year 1, $170,000 in year 2, and $280,000 in year 3. The discount rate is 12%.

a.	Calculate the PV of cash inflows. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Present value

$

b.	Is the factory a good investment?
	No

Explanation:

a.

PV of cash inflows = ($110,000/1.12) + ($170,000/1.122) + ($280,000/1.123) = $433,035.71

b.

This does not exceed the cost of the factory, so the investment is not attractive.