Question 7

A logistics company is considering a project with an initial investment of $100,000. The expected net cash flows for the project are detailed below. Assume the company's cost of capital is 9%. Calculate and comment on the project's NPV, IRR, and discounted payback period.

• Year 1: Cash Flows = $20,000, Discount Factor = 0.917
• Year 2: Cash Flows = $30,000, Discount Factor = 0.842
• Year 3: Cash Flows = $40,000, Discount Factor = 0.772
• Year 4: Cash Flows = $50,000, Discount Factor = 0.708
• Year 5: Cash Flows = $50,000, Discount Factor = 0.650
• Salvage Value: $30,000, Discount Factor = 0.650

Requirements:

1. Calculate the Net Present Value (NPV).
2. Determine the Internal Rate of Return (IRR).
3. Compute the discounted payback period.
4. Provide a brief analysis based on NPV and IRR.