Problem. Suppose a firm is considering the following project, where all of the

dollar figures are in thousands of dollars. In year $2024,$ the project requires an

$$37,500$ investment in plant and equipment, is depreciated using the straight$-$line

method over seven years, and has a salvage value of $$5,600$ in year $2031.$ The

project is forecast to generate sales of $5700,10300,14900,19500,24100,16150,$

and $8200$ units from $2025$ until $2031.$ Starting from $2025,$ the inflation rate

is forecast to be $1\mathrm{.}5\%,1\mathrm{.}8\%,2\mathrm{.}2\%,2\mathrm{.}5\%,2\mathrm{.}8\%,2\mathrm{.}8\%,$ and $2\mathrm{.}8\%.$

Starting from $2025,$ the real cost of capital is forecast to be $9\mathrm{.}3\%,9\mathrm{.}5\%,9\mathrm{.}7\%,10\mathrm{.}0\%,10\mathrm{.}2\%,$

$10\mathrm{.}4\%,$ and $10\mathrm{.}6\%.$ The tax rate is forecast to be a constant $21\mathrm{.}0\%.$ Sales revenue

per unit is forecast to be $$15\mathrm{.}30$ in year $2025$ and then grow with inflation. Variable

cost per unit is forecast to be $$12\mathrm{.}50$ in year $2025$ and then grow with inflation. Cash

fixed costs are forecast to be $$7,940$ in year $2025$ and then grow with inflation.

Question $1$: What is the project$$s NPV based on the current given assumptions?

Answer:

Question $2$: What is the project$$s IRR based on the current given assumptions?

Answer:

Question $3$: Should you pursue the project based on NPV and IRR?

Answer: