ExxonMobil is evaluating a new project with the following cash flows:
•Initial investment: $5,000,000
•Year 1: $1,200,000
•Year 2: $1,400,000
•Year 3: $1,600,000
•Year 4: $1,800,000
The required rate of return is 18%.
Required:
1.Calculate the Net Present Value (NPV) of the project.
2.Determine the Internal Rate of Return (IRR).
3.Discuss the impact of risk analysis on capital budgeting decisions.