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Ford Motor Company is considering a project with an initial investment of $450,000. The asset will be depreciated over five years at 20% per year.

Ford Motor Company is considering a project with an initial investment of $450,000. The asset will be depreciated over five years at 20% per year. The expected cash flows are:

Year

Inflow ($)

Outflow ($)

Year 1

140,000

60,000

Year 2

150,000

65,000

Year 3

160,000

70,000

Year 4

170,000

75,000

Year 5

180,000

80,000

a. What is the payback period?
 b. Calculate the internal rate of return (IRR).
 c. Assuming a cost of capital of 10%, what is the net present value (NPV) of the cash flows?
 d. Should Ford Motor Company proceed with the project?

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