A project requires an initial investment of $260,000 and is expected to generate the following net cash inflows:

Year 1: $95,000

Year 2: $90,000

Year 3: $85,000

Year 4: $80,000

1. What is the payback period of the project?

2. Calculate the NPV (net present value) if the minimum desired rate of return is 12%. Should you accept the project?

3. Calculate the NPV (net present value) if the minimum desired rate of return is 12% and inflation rate is 6%. Should you accept the project?

4. (Calculate the profitability index of the project for part b). Should you accept the project?

5. (4 Points) Calculate the profitability index of the project for part c). Should you accept the project?