Was the investment worth undertaking

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Greyhound has opened a new bus route; the initial investment cost of the route was $55,000. It will produce $30,000 (in constant dollars) of revenue annually for 6 years. The real MARR is 8% and there will be 2% inflation annually.

a) Determine the current cash flows for each year taking into account the inflation rate (actual dollar cash flows).

b) Find the PW for the investment (using above actual dollar cash flow values Hint: It would be easier to calculate the PW if you rounded the market MARR DOWN to the nearest whole number.

c) Was the investment worth undertaking? Why?

Reference no: EM131524902


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