A Firm Has an Opportunity to Invest in a Project

A firm has an opportunity to invest in a project that will generate $55,000 per year for the next 10 years and requires an initial investment of $300,000.The firm will need to raise equity to pay for the project, but the flotation costs are 10% of the funds raised.If the firm's discount rate is 11%, should they invest in this project?

A) Yes, since the NPV is approximately $23,900
B) Yes, since the NPV is approximately $9,500
C) No, since the NPV is approximately -$6,100
D) No, since the NPV is approximately -$8,500 NPV = $55,000[1/.11 - (1/.11) (1.11) ^-10] - $300,000= $23,908
Flotation costs = .10 x ($300,000) = $30,000