QUESTION $2$

$($a$)$ The Lucky Business is looking at a project with the estimated cash flow as follows:

Initial Investment at start of project: $$3,600,000$ Cash Flow at end of Year $1$: $$500,000$

Cash Flow at end of Years $2$ through $6$: $$625,000$ each year Cash Flow at end of Year $7$ through $9$: $$530,000$ each year Cash Flow at end of Year $10$: $$385,000$

Lucky Business wants to know the payback period, NPV$,$ IRR, and PI of this project. The appropriate discount rate for the project is $14\%$ and the cutoff period is six years for major projects.

Determine if the project is accepted or rejected under the four different decision models. Give reasons for your decisions.

$($b$)$A financial manager has three financial decisions to undertake in a company$$ Explain the three $(3)$ decisions with the aid of an example.

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