The following are cash flows for an investment:
•Initial outlay: $7,000
•Year 1: $2,000
•Year 2: $2,000
•Year 3: $2,500
•Year 4: $3,000
•Year 5: $3,000
The discount rate is 7%.
Requirements:
1.Compute the NPV.
2.Calculate the payback period.
3.Determine the Profitability Index (PI).
4.Evaluate the IRR.
5.Assess the effect of a change in the initial outlay to $8,000.