Answer
The investment should be made.
Work Step by Step
The net present value is the difference between the present value of the net cash flows and the initial capital investments.
Formula = Net Present value = Net annual cash flows - Capital investment
So, the present value of the net annual cash flow is the net cash flows times the discount factor
Formula: present value of net annual cash flows = Net Annual Cash Flows * Discount factor
Now By substituting the given values $450000$ net annual cash flows and the 5.65 discount factor to determine the present value of net annual cash flows.
The present value of net annual cash flows = Net annual cash flows * Discount Factor
=$40000*5.65$
=$226000$
So now Substituting the $226000$ the present value of the net annual cash flows, and the $215000$ capital investments to determine the net present value.
Net Present Value =Net Annual cash flows - capital investment
=$226000-215000$
=$11000$
Thus, the net present value of the investment is $11000$
The choice guideline for the net present worth technique is whether the task has a current worth more noteworthy than zero since, if the net present worth is at least zero, the proposition is satisfactory. In the event that the net present worth is under zero, the proposition ought to be dismissed
Since the proposed investment has a net present value greater than zero the proposal should be accepted and the investment should be made .
