For this problem, you are evaluating an investment proposal to expand your market reach by selling your products internationally. The initial investment required to set everything up is $1.2m and you expect to generate after-tax cash flows of $250,000 each year for the next 10 years. There is no salvage value at the end of the ten years. The discount rate you are using is 6%, the payback cutoff period is 4 years and the companys tax rate is 30%. Which of the following statements is incorrect:

A The IRR of the project is 16%, therefore higher than the discount rate, therefore I should reject this project.

B The project payback is beyond 4 years and therefore, based on the payback criterium, I should reject this project.

C The NPV of the project is $640,000, which is positive and therefore I would accept this project.

Next, you want to do a break-even analysis to see how solid your project recommendation is. How low can your annual after-tax free cash flows be for NPV to break even (i.e. to get a zero NPV).

A As long as my annual cash flows are at least $189k, NPV will be positive

B As long as my annual cash flows are positive, NPV will be at least zero.

C As long as my annual cash flows are at least $164k, NPV will be positive

Finally, you learned that you will have a salvage value to take into consideration after all. At the end of ten years, there will be a recovery of working capital of $50,000 and you will be able to sell fully-depreciated property and equipment for $200,000 (before any tax considerations). Including these salvage value considerations into your analysis, what is the minimum annual after-tax cash flow the project has to generate to be NPV zero?

A As long as my annual cash flows are at least $150k, NPV will be positive

B As long as my annual cash flows are at least $149k, NPV will be positive

C As long as my annual cash flows are at least $145k, NPV will be positive