Advance Inc. is considering investing 10 million on a project. It is expected that the project will generate annual cash inflows of 1.5 million in perpetuity. The corporates opportunity cost of capital for this project is 12%.

Required:

1. a) Demonstrate the net present value (NPV) approach to evaluate whether to invest in this

   project.

   [2 marks]

2. b) Demonstrate the internal rate of return (IRR) approach to evaluate whether to invest in this

   project.

   [2 marks]

3. c) Which approach should be adopted when NPV and IRR generates conflicting results, and why?

   [6 marks]