1. A project proposal has the following estimated cash flows:

	Year 0	Year 1	Year 2	Year 3	Year 4	Year 5	Year 6
Initial outlay	$ 800,000
Sales		$ 440,000	$ 490,000	$ 540,000	$ 590,000	$ 425,000	$ 350,000
Variable cash expenses		$ 132,000	$ 147,000	$ 162,000	$ 177,000	$ 127,500	$ 105,500
Fixed cash expenses		$ 85,000	$ 95,000	$ 105,000	$ 115,000	$ 125,000	$ 135,000
Taxes		$ 66,900	$ 74,400	$ 81,900	$ 89,400	$ 51,750	$ 33,000
After tax disposition value (positive)							$ 325,000

Some of these cash flows are positive and some are negative. Use what you know about the nature of sales, expenses, and taxes to determine if they are positive or negative. After doing so:

a. Using a 7% cost of money, please calculate the net present value and explain what this number means.

b. Please calculate the profitability index (with two additional decimal places) and explain what this number means.

c. Please calculate the internal rate of return and explain what this number means (as a percentage with two additional decimal places).

d. Please calculate the payback period (in years with two additional decimal places) and explain what this number means.

e. Using the same 7% cost of money, please calculate the present value payback period (in years with two additional decimal places) and explain what this number means.