Federal Express is contemplating a new venture project and has done a detailed five year cash flow estimate with the following result ($000):

C₀ C₁ C₂ C₃ C₄ C₅

(300) (60) 70 100 120 180

The firms cost of capital is 12%.

a. What is the projects NPV and IRR, and make the appropriate recommendation to management.

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b. Peter Morton, Federal Expresss Marketing VP, has argued that its unreasonable to exclude cash flows past year five from the analysis. Calculate the projects terminal value assuming year fives cash flow goes on forever. Recalculate the projects NPV and IRR under that Peter assumption.

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c. Peter further argues that the most appropriate assumption is that cash flows beyond the fifth year incorporate a three percent long run growth rate. Calculate the terminal value, NPV, and IRR implied by this assumption.

(Any advice on how to solve using excel is appreciated)