After several years of operating the homeless shelter, you bring a new proposal to the governing board. By cleaning up an unused room and upgrading the church kitchen, the shelter will be able to expand its capacity.
As a result, it will generate cash inflows and cash outflows over the remaining 5 years of the City contract in the amounts in the table below.
If the discount rate is 5%, should the church proceed with this investment? Use NPV to show your analysis.
| Year |
Cash Inflows |
Cash Outflows |
| 0 |
0 |
(90,000) |
| 1 |
37,000 |
(18,000) |
| 2 |
39,000 |
(18,000) |
| 3 |
42,000 |
(18,500) |
| 4 |
44,000 |
(18,500) |
| 5 |
45,000 |
(19,000) |