Alpha Manufacturing Inc. is considering whether to invest in a new project. The project involves setting up a manufacturing facility to produce a new product line. The initial investment required for the project is $$1,000,000.$

The project is expected to generate cash flows for the next five years as follows:

Year $1$: $$300,000$

Year $2$: $$400,000$

Year $3$: $$500,000$

Year $4$: $$400,000$

Year $5$: $$300,000$

Alpha Manufacturing Inc. decides to use a discount rate of $10\%$ to account for the time value of money and the risk associated with the project.

What is the payback period?

$1\mathrm{.}87$ years

$2$ years

$2\mathrm{.}6$ years

$3\mathrm{.}2$ years

What is the NPV of the project? Should the company accept the project?

$-$$$245,369\mathrm{.}25$; no because NPV is negative

$-$$$245,369\mathrm{.}25$; yes because NPV is negative

$$438,444\mathrm{.}96$; no because NPV is positive

$$438,444\mathrm{.}96$; yes because NPV is positive

What is the internal rate of return $($IRR$)?$ Should the company accept the project?

$25\mathrm{.}67\%$; yes because the IRR is greater than the cost of capital.

$25\mathrm{.}67\%$; no because the IRR is greater than the cost of capital.

$14\mathrm{.}69\%$; yes because the IRR is greater than the cost of capital.

$14\mathrm{.}69\%$; no because the IRR is greater than the cost of capital.