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Tesla, Inc. is evaluating a project that requires an initial investment of $400,000. The asset will be depreciated over five years at 20% per year.

Tesla, Inc. is evaluating a project that requires an initial investment of $400,000. The asset will be depreciated over five years at 20% per year. The cash flows from the project are projected as follows:

Year

Inflow ($)

Outflow ($)

Year 1

120,000

50,000

Year 2

130,000

55,000

Year 3

140,000

60,000

Year 4

150,000

65,000

Year 5

160,000

70,000

a. What is the payback period?
 b. Calculate the internal rate of return (IRR).
 c. Assuming a cost of capital of 11%, what is the net present value (NPV) of the cash flows?
 d. Should Tesla proceed with the project?

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