E F 2 3 4 Consider the following four-year project. The initial after-tax outlay or after-tax cost is $950,000. Discount rate is 10%. The future after-tax cash inflows are given below. 5 6 a) What is the payback period? Would you go ahead with the project if your criterion is to launch projects that have payback period 3 years or less? b) What is the NPV of the project? 7 c) What is the IRR of the project? 8 d) Profitability Index 9 10 11 12 e) Should you go ahead with the project? f) Create a worse case scenario for the project where initial investment has to be $1.1 million, instead of $950,000. 13 Discount rate: 14 15 16 Year Cash flow 17 Remains to recover 18 19 Payback Period 20 NPV 21 IRR 22 Profitability Index 23 24 24 $ 10% 0 2 3 4 (950,000) $ 450,000 $ 350,000 $ 250,000 $ 200,000