1. Bulldog Memorabilia, a small screen printing firm, is considering investing in new technology that allows customers to design their own products online, then they are automatically printed and shipped with only minimal labor costs. The firm has projected the following cash flows

Time 0 Time 1 Time 2 Time 3 Time 4 Time 5

-2,000,000 450,000 550,000 625,000 600,000 400,000

The firm anticipates selling the equipment for 300,000 (its salvage value) at time 5 and estimates the project cost of capital to be 10%. The firm estimates the IRR on the project to be 13.19%

a. Calculate the Net Present Value of the project (5 points)

b. Calculate the Payback Period and Discounted Payback period (5 points)

c. Calculate the Profitability Index for the project (5 points)

d. Will the NPV and IRR always provide the same accept / reject decision (is it possible for you to accept a project using NPV and reject it using IRR). Explain in detail (show why they will always agree or provide an example where they dont) (5 points)

e. If you were comparing this project to another project and could only accept one of them, would it matter if you ranked the projects based upon their NPV or IRR? Explain in detail. (5 points)