Capital Budgeting Decisions

Chee Company has gathered the following data on a proposed investment project:

Investment required in equipment …………. $240,000

Annual cash inflows ……………………………. $50,000

Salvage value …………………………………….. $0

Life of the investment …………………………. 8 years

Required rate of return ………………………… 10%

Assets will be depreciated using straight

line depreciation method

Required:

Using the net present value and the internal rate of return methods, is this a good investment?