Grove Alliance Inc. is considering a major investment project. The initial outlay of

$1,050,000$ will, in subsequent years, be followed by positive cash flows as shown

below:

Year$-1=70000$

Year$-2=107000$

Year$-3=357350$

Year$-4=510000$

Year$-5=350000$

Year$-6=225000$

Year$-7=80000$

The management of Grove Alliance Inc. expect that the cash inflows shown above are

also an accurate estimation of the profit for each of the years. They estimate the

appropriate discount rate as $12$ per cent per annum.

After the end of the seventh year, the business activity will cease, and no more cash

flow will be produced. The initial $1,050,000$ investment in plant and machinery is to be

depreciated over the $7-$year life of the project using the straight$-$line method. These assets will have no value after Year $7.$

Evaluate and discuss the economic viability of this project based on:

a$)$ Payback period $($PBP$)$

b$)$ The discounted payback period

c$)$ Net Present value $($NPV$)$

d$)$ Internal rate of return $($IRR$)$

e$)$ The financial acceptability of the project, based upon the above data.