Hamilton Control Systems will invest $90,000 in a temporary project that will generate the following cash inflows for the next three years.
Year
Cash Flow
1............$23,000
2............38,000
3............60,000
The firm will be required to spend $15,000 to close-down the project at the end of three years. If the cost of capital is 10 percent, should the investment be undertaken? Use the net present value method. [Hint: For Year 3, net out the cash inflow and cash outflow.]