The Long Company is considering expanding its production. The cost of the project is $1,000,000. If implemented, the project will generate cash flows of $245,000 per year for five years.
In Year 5, The Long Company will incur costs of $42,500 related to the project. If the WACC is 6 percent, calculate the NPV of the project.
Would you recommend the company proceed with the project. Why or why not? Be sure to discuss quantitative as well as qualitative factors.