Question 4

A company has the opportunity to invest in a project requiring an initial outlay of $120,000. The expected cash flows over the next 4 years are given below. The company's cost of capital is 15%. Evaluate the project by calculating the NPV, IRR, and payback period.

Cash Flows:

• Year 1: $30,000
• Year 2: $40,000
• Year 3: $50,000
• Year 4: $60,000

Requirements:

1. Calculate the NPV.
2. Determine the IRR.
3. Calculate the payback period.
4. Provide an analysis of the project’s financial attractiveness.