A project requires an initial investment of ₦25,000 and is expected to generate the following cash inflows: Year 1: ₦4,800; Year 2: ₦3,600; Year 3: ₦2,400; Year 4: ₦1,200; Year 5: ₦1,000. If the disco

The formula for the present value of a future cash flow is $PV = \frac{CF_n}{(1+r)^n}$, where $CF_n$ is the cash flow in year $n$, $r$ is the discount rate (10% or 0.10), and $n$ is the year.

• Year 1 (₦4,800): $$PV_1 = \frac{4800}{(1+0.10)^1} = \frac{4800}{1.10} \approx 4363.64$$
• Year 2 (₦3,600): $$PV_2 = \frac{3600}{(1+0.10)^2} = \frac{3600}{1.21} \approx 2975.21$$
• Year 3 (₦2,400): $$PV_3 = \frac{2400}{(1+0.10)^3} = \frac{2400}{1.331} \approx 1803.16$$
• Year 4 (₦1,200): $$PV_4 = \frac{1200}{(1+0.10)^4} = \frac{1200}{1.4641} \approx 819.61$$
• Year 5 (₦1,000): $$PV_5 = \frac{1000}{(1+0.10)^5} = \frac{1000}{1.61051} \approx 620.92$$

Sum the present values calculated in Step 1:

$$Total\ PV\ of\ Inflows = PV_1 + PV_2 + PV_3 + PV_4 + PV_5$$ $$Total\ PV\ of\ Inflows = 4363.64 + 2975.21 + 1803.16 + 819.61 + 620.92$$ $$Total\ PV\ of\ Inflows = 10582.54$$

The NPV is the total present value of inflows minus the initial project cost.

$$NPV = Total\ PV\ of\ Inflows - Initial\ Project\ Cost$$ $$NPV = 10582.54 - 25000$$ $$NPV = -14417.46$$

Since the Net Present Value (NPV) is negative (₦-14,417.46), the project is expected to generate less value than its cost, even after accounting for the time value of money. Therefore, the firm should not undertake this project.

The NPV of the project is $\boxed{\text{₦-14,417.46}}$.
Advice: Do not undertake the project as its NPV is negative.