Problem:
Kern Co. is planning to invest in a two-year project that is expected to yield cash flows from operations, net of income taxes, of $50,000 in the first year and $80,000 in the second year. Kern requires an internal rate of return of 15%. The present value of $1 for one period at 15% is 0.870 and for two periods at 15% is 0.756. The future value of $1 for one period at 15% is 1.150 and for two periods at 15% is 1.323.
Required:
The maximum that Kern should invest immediately is
A) $81,670
B) $103,980
C) $130,000
D) $163,340
Note: Please provide through step by step calculations.