Problem

An investor is being asked to invest in a project with an initial investment of $3,000 with first year income of $400 increasing by $100 every year for five years. His MARR is 5%. If he phones you with this problem when you have no access to anything other than paper and pen, what would be your recommendation to him? Should he accept this proposal or not? Explain your answer. 10- An investor is offered the opportunity of investing $100,000 in a six year project that will have a net income of $25,000 per year.

a. If inflation is a constant 4% per year and his after inflation MARR is 10%, should he invest in this project?

b. If he is looking to invest his $100,000 where he can get an inflation adjusted (i.e., net, after inflation is taken into account) of 12%, what minimum rate of interest he should shop for?