EV Enterprises, Inc. is considering investing in a project with cash flows given below. The firm requires a minimum rate of return of 9 percent.

Year Cash flow

0 $ -400,000

1 $300,000

2 $175,000

3 $50,000

Answer the following questions. You must show your work for credit. For example, you can describe the steps you followed to arrive at your answer or values you entered in the calculator. Either underline or highlight your answer.

(a) Calculate the net present value.

(b) Calculate the internal rate of return.

(c) Calculate the profitability index.

(d) Assume EV Enterprises currently has 100,000 shares outstanding and that the stock is currently trading at a price of about $5.50. If EV announces that it is going to carry out this project what will be the likely impact on the stock price? (By how much will the price go up or down?). In your answer you may assume that the announcement includes information on the profitability of the project and that the market is efficient (that is, investors believe the announcement).