1) Prescott Corporation is considering investing in a project which requires an outlay of $10 million in cash at the start, but is expected to generate revenues of $3 million at the end of one year, $4 million at the end of two years, and $5 million at the end of three years. The project will then be terminated, with no further revenues or costs.There are no further costs after the initial outlay of $10 million.

Should this project be undertaken if the opportunity cost of Prescotts capital is 10%? Why or why not?

Show all calculations you used to arrive at your answer.

B)Using the numbers given in part (a) for revenues and costs, set up an equation you would use to find the projects internal rate of return (IRR).