Modeling Decisions

Your manager comes to you and says that your department has been offered the chance to work on 2 specific projects. Unfortunately, your manager does not know what to do based on the available organizational budget. Prepare a PowerPoint presentation (with presenter notes) that shows if the project with the information below should be selected. To support whether the project should selected, calculate and use the net present value (NPV). Use the following information:

Project costs $420,000 upfront.
Current yearly interest rate is 10%.
Project payouts will be Year 1, Year 2, Year 3, and Year 4, as follows:
Yr. 1: $110,000
Yr. 2: $121,000
Yr. 3: $133,100
Yr. 4: $146,410
Your presentation must include the following:

The NPV of the project
A recommendation of either accepting the project or saying the money should be invested in another endeavor

Sample Solution

ACED ESSAYS