Sigma Company is examining the cash flows of the capital budgeting project shown below. The project is expected to cost $400,000. Sigma has a required rate of return of 12%, and a maximum acceptable payback period of 3 years.

0	1	2	3	4	5
($400,000)	$150,000	$150,000	$200,000	$100,000	$100,000

a. Calculate the NPV of the project. Based on the NPV analysis, should Sigma accept the project? Why or why not?

b. Calculate the payback period of the project. Based on the calculated payback, should Sigma accept the project? Why or why not?