Answer :
Positive NPV with 11% required return, therefore, we will accept this proposal.
The financial concept known as net present value aims to capture the total value of an investment opportunity. The goal of NPV is to forecast all future cash inflows and outflows associated with an investment, discounting each of them, and adding them together.
PV of input minus PV of output is the net present value (NPV) of the project. The following equation represents the NPV of this project at the desired return of 11%.
NPV = -$28,300 + $12,300 / 1.11 + $15,300 / 1.112 + $11,300 / 1.113
= $3,461.37
Positive NPV with 11% required return, therefore, we will accept this proposal.
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