Problem 5-2 (algorithmic) Question Help Lignin is a basic component of almost an

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Problem 5-2 (algorithmic) Question Help Lignin is a basic component of almost any plant that grows, so it is one of the most abundant organic compounds in the world. Almost anything derived from oil can be made out of lignin. The question is "can we do it cost-effectively and consistently?" A startup company has developed a process to derive plastics, carbon fiber and other advanced materials from lignin. The cash flow diagram for this pro a profitable undertaking? 6 More Info Click the icon to view the diagram for cash flows Click the icon to view the interest and annuity table for discrete conm The present worth of the venture is million (Round to two decimal 30 25 20 15 10 4 5678 9 EOY Enter vour answer in the answer box and then click Check Answer. 10 15 part remaining

Explanation / Answer

Downward arrows in cash flow diagram indicates cash outflow.

Cash outflows are denoted with negative sign while calculating present worth.

Upward arrows in cash flow diagram indicates cash inflow.

Cash inflows are denoted with positive sign while calculating the present worth.

Calculate the Present Worth -

PW = -$15 million - $10 million(P/F, 15%, 1) - $5 million(P/F, 15%, 2) + $5 million(P/F, 15%, 4) + $10 million(P/F, 15%, 5) + $15 million(P/F, 15%, 6) + $20 million(P/F, 15%, 7) + $25 million(P/F, 15%, 8) + $30 million(P/F, 15%, 9)

PW = -$15 million - ($10 million * 0.8696) - ($5 million * 0.7561) + ($5 million * 0.5718) + ($10 million * 0.4972) + ($15 million * 0.4323) + ($20 million * 0.3759) + ($25 million * 0.3269) + ($30 million * 0.2843)

PW = -$15 million - $8.70 million - $3.78 million + $2.86 million + $4.97 million + $6.48 million + $7.52 million + $8.17 million + $8.53 million

PW = $11.05 million

The present worth of the venture is $11.05 million.

When the present worth of a project is positive then the project is a profitable undertaking.

So,

The given project is a profitable undertaking.

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