Question 6

Consider the following investment proposal:

Projected Cash Flows:

• Year 0: -$120,000
• Year 1: $30,000
• Year 2: $40,000
• Year 3: $50,000
• Year 4: $60,000

Requirements:

1. Determine the cumulative cash flow for each year.
2. Calculate the payback period.
3. Compute the NPV at an 8% discount rate.
4. Calculate the IRR.
5. Recommend whether to proceed with the investment based on the payback period, NPV, and IRR.