Marclaren a long term investor is considering if he can invest in an investment project with an initial cost of £550,000 and an estimated revenue return of £150,000 per annum for 5 years.He uses the following table of discounting factors:
Discounting factor
Year 1 0.901
Year 2 0.812
Year 3 0.731
Year 4 0.659
Year 5 0.593
Q1. Calculate the net present value of the project.
Q2. Advise him whether the project is a worth while investment at the discount rate used.
Q3. Calculate the discount rate used.
Q4. Explain what the net present value calculated in (a) represents.