Ford Motor Company is evaluating a new project with the following cash flows:
•Initial investment: $6,000,000
•Year 1: $1,500,000
•Year 2: $1,700,000
•Year 3: $1,900,000
•Year 4: $2,100,000
The company's required rate of return is 20%.
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.