A firm is considering investing in a project that requires an initial investment of $200,000 and is expected to produce cash inflows of $60,000, $80,000, and $100,000 in first, second, and third years. There will be no residual value.

The firm applies a discount rate of 10%.

Discount factors for Year 1, 2 and 3 are 0.909, 0.826, and 0.751 respectively.

Required:

i) Calculate the NPV of the project.

ii) Explain the meaning of NPV and its advantages as an investment evaluation method compared with the Accounting Rate of Return and Payback methods.