7. Best World Limited, a small business is considering expanding its area of operation with an initial cost estimation of US$65,000. The entrepreneur intends investing US$26,000 from retained earnings and financing the remainder with a bank loan. The interest rate on loans is 12 % while the opportunity cost on the firm’s own funds is 10 %. The expected annual free cash flows from the project are as follows:

Year Cash flows US$

1 20,000 2 22,600 3 27,200 4 30,000 5 35,000 6 38,000 7 40,000 Show whether this project is viable or not, using the NPV and MIRR methods assuming the cash flows are reinvested at the cost of capital rate.