A firm is looking to invest 1.6 Million for which they expect initial Sales of 3,950,000 that grow 20% annually. Product contribution is 40% (costings to be explained); indirect production costs are 264,000 and indirect operating costs (excluding advertising) are 210,000:

i. Develop a Project Cash Forecast for Years 1 3 and examine the project financials: Payback Period and Net Present Value (NPV) at a discount rate of 10%.

ii. Increase the discount rate till you achieve a negative NPV and use this to establish the project Internal Rate of Return. Comment on how this result is likely to be viewed.