Bennett Company is considering investing in a project. The following information is available.

Investment Cost of the project $25,000

Useful Life of the investment 8 years

Salvage value of the investment under tax law $5,000

Expected annual sales $10,000

Expected annual cash variable expenses $3,000

Expected annual cash fixed expenses $2,000

These cash flows will continue for 8 years and will stop after that. Income tax rate 35%.

1. Create a Contribution Margin income statement for the first year of operations.

2. What is the annual after-tax cash flow generated by this investment?

3. What is the projects payback period?

4. Compute the Net Present Value (NPV) of this project using a 10% discount rate.

5. What is the Internal Rate of Return (IRR) of the investment project?

6. The companys required rate of return is 10% and has a policy to accept only projects with a payback period of 3 years or less. Should the company accept this investment project? Why?