A friend of yours can invest in a project. The cost is $14,000. Annual cash flows are estimated to be $5,000 per year for six years, but could vary between $2,500 and $7,000. Your friend estimates that the cost of capital (interest rate) is 11%, but it could be as low as 9.5% and as high as 12%. The basis of the decision to invest will be whether the project has a positive net present value. Construct a tornado diagram for this problem. Based on the tornado diagram, advise your friend regarding whether to invest or not
Solved by D. S. in 22 mins