Sierra Company is considering a long-term investment project called ZIP. ZIP wil

Question

Sierra Company is considering a long-term investment project called ZIP. ZIP will require an investment of $114,953. It will have a useful life of 4 years and no salvage value. Annual cash inflows would increase by $80,210, and annual cash outflows would increase by $41,190. The company's required rate of return is 14%.

Calculate the net present value on this project.(If the net present value is negative, use either a negative sign preceding the number eg -45 or parentheses eg (45). Round computations and final answer for present value to 0 decimal places, e.g. 125.Round computations for Discount Factor to 5 decimal places.)

Explanation / Answer

Pv of net cash inflow = 39020 PVIFA (14%,4) = $113,693

net investment = $114,953

NPV = $ -1260

therefore, The project should not be accepted

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