ExxonMobil is evaluating a new project with the following cash flows:
•Initial investment: $7,000,000
•Year 1: $1,800,000
•Year 2: $2,000,000
•Year 3: $2,200,000
•Year 4: $2,400,000
The required rate of return is 22%.
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.