Given an initial asset investment of $3 million, and projected cash flows of $700,000 per year for five years, and with a discount rate of 8%:

a) Calculate NPV, P.I., IRR, and payback:

1. NPV ________________
2. P.I. ________________
3. IRR ________________
4. Payback ________________

b) Would you accept this project? Why/why not:

c) What are the primary weaknesses of the NPV capital budget decision:

d) If the project required an increase in working capital (WC), how would you include WC into your budget decision?

e) What are the significant differences between the NPV and IRR capital budgeting methods?