Larry has recently retired and is now considering starting a new business of icecream. He can purchase a used icecream truck that has a useful life of 5 years, but that is great because he's planning to retire in 5 years. The salvage value of the truck will be zero at the end of the 5 years (cant even sell for junk) and the value of his business will also be zero. He estimates that he can project consistent cash flows of 2,200 for the next 5 years (with the same cash flows every year). He requires a 20% rate of return (given the cost of capital and the opportunity costs of giving up his time).

Initial Cost: $6000

Life of the Project: 5 years

Annual Cash Inflow: $2200

Salvage Value: $0

Required Rate of Return: 20%

1) What is NPV for this investment?

2) What is the IRR?

3) Should he invest in the truck given the NPV and/or IRR? Why or why not?