A firm plans to invest in a new product line that requires an upfront investment of $1,000,000. The product line is expected to produce annual net cash inflows of $250,000 for the next 7 years. The company uses a discount rate of 8%.

Requirements:

1. Compute the NPV of the investment.
2. Determine the IRR.
3. Evaluate the payback period.
4. Calculate the accounting rate of return (ARR) based on the initial investment.
5. Discuss whether the investment should be undertaken if the required return is 10%.