The NamPort Company is involved in searching for locations in which to drill for oil. The firms current project requires an initial investment of N$15 million and has an estimated life of 10 years. The expected future cash inflows for the project are a shown in the following table.

YEAR CASH INFLOW

1 600000

2 1000000

3 1000000

4 2000000

5 3000000

6 3500000

7 4000000

8 6000000

9 8000000

10 1200000

The firms current cost of capital is 13%.

Required: Determine the following for the project and advice management whether the project can be accepted if the company requires to recover its investment within three years. a) Net present value and state whether the project should be accepted or not. (8 marks) b) Internal rate of return (IRR) and state whether the project should be accepted or not. (12 marks) c) Modified internal rate of return (MIRR) (12 marks) d) The payback period. (6 marks) e) The discounted payback period (6 marks) f) The accounting rate of return (ARR)(average investment) (8 marks) Note: State the reasons in each case why the project should be accepted or rejected.