Decision-Making with Relevant Costs at Microsoft

• Values:

• Relevant Costs of New Project: $2,000,000
• Expected Annual Cash Inflows: $600,000
• Project Life: 5 years
• Discount Rate: 10%
• Requirements:

0. Calculate the net present value (NPV) of the new project for Microsoft.
1. Determine the internal rate of return (IRR) and payback period.
2. Discuss how relevant costs influence strategic decisions at Microsoft.
3. Recommend whether Microsoft should pursue the project based on financial analysis.