Activity 3: (this example is important for your Test 2) Ahmed ple is considering an investment in a new 3-year project that requires an initial cost of £ 70,000 . The director paid £ 1,000 to a market consultant to research the investment details of the project, which has revealed the following estimated cashflows generated during the project's life: & Year 1 & Year 2 & Year 3 Cashflows & £ 22,000 & £ 32,000 & £ 25,000 The company's cost of capital is 15 % , and the table below shows the related discount factors as extracted from the present value table: Period (n) & Discount factor (r) neq 15 % 1 & 0.870 2 & 0.756 3 & 0.658 Required: Calculate the NPV of each project and advise the manager on whether the project should be accepted or rejected based on its financial viability.

The Net Present Value (NPV) of a project could be determined by finding the difference between the present value of cash inflows and the present value of cash outflows. It represents the estimated financial impact on the company of undertaking the project. If NPV is positive, the project is considered viable and good for the financial health of the company; if NPV is negative, the project could be rejected.In order to calculate NPV for the mentioned project that Ahmed Plc is planning, we have to determine the present value of each of the given annual cash inflows by multiplying them with the corresponding discount factor. After that, the sum of present values is subtracted from the sum of the initial cost and other costs (consultation fees here) of the project. Let's work out each step:The cash inflows for the three years are estimated to be and . To calculate the NPV, first, we need to calculate the present value of cash inflows by using given discounting factors:Cash flow (Year 1)= Cash flow (Year 2)= Cash flow (Year 3)= Then, we sum up all the present values and subtract the initial investment (including research cost):NPV= Total Present value of inflows - Initial investmentNPV = ( £ 19,140 + £ 24,192 + £ 16,450 ) - ( £ 70,000 + £ 1,000)NPV = £ 59,782 - £ 71,000NPV = - £ 11,218Finally, since NPV is a negative figure, it shows that the present value of inflows (gain) it delivers in future is less than the money it obligates to pay (loss) initially. Hence, this shows that the project is financially not viable and need to be rejected given by the financial data currently available.