Congratulations! You developed a new product for your company this year, and the completed development project cost is just $700,000. The new product brought in revenue this year of only $80,000 this year, but is expected to bring in revenue of $150,000 per year for five more years.

• Draw a cash flow diagram for this story.

• What is the NPV of this overall project if the discount rate is 5% ?

• What is the NPV of this overall project if the discount rate is 10% ?

• Based on your answers so far, do you actually deserve congratulations? Why or why not?

• If you had to decide to pursue either this project or another project with an internal rate of return (IRR) of 5%, which would you choose, and why?