4. A new sprinkler system for the production facility at Carson Carpet Company (C^3) will cost $525,000. This project will generate the following year-end, after-tax, net cash flows:

Year 1 = $300,000 Year 2 = $200,000 Year 3 = -$50,000 Year 4 = $150,000

(note: the Year 3 CF is negative)

a. If the discount rate is 5% what is the Net Present Value (NPV) of the project? (2.5 points) Does the NPV indicate that this project is acceptable? (half-point)

b. Based on your answer is part a, is the true Internal Rate of Return (IRR) of this project greater than or less than 5%? (half-point, no calculations needed)