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An auditor is currently carrying out a post-completion audit of a project originally estimated to be worth $100,000.
An auditor is currently carrying out a post-completion audit of a project originally estimated to be worth $100,000. From the post-completion audit, the findings are that results from the 3rd year will be $90,000, while that of the 4th and 5th years will be $60,000 and $40,000 respectively.
There's a growing concern that the projected cash flows might not be feasible, even when they were originally outlined as follows:
1st year = $60,000
2nd year = $80,000
3rd year = $70,000
4th year = $80,000
5th year = $60,000
Assuming that all cash flows increase and the cost of capital for this company will be 12% p.a. can determine whether the investment should continue or not?
