Question: Your firm has an opportunity to make an investment of $50,000. Its cost of capital (interest rate) is 12 percent. It expects after-tax cash flows (including the tax shield from depreciation) for the next 5 years to be as follows:

Year 1 10,000

Year 2 20,000

Year 3 30,000

Year 4 20,000

Year 5 5,000

Hint: You can use the Present Value Table A. 1c in pages 552 and 553 of text book which are attached in the e-mail.

a) Calculate the NPV

b) Calculate the IRR (to the nearest percent)

c) State whether this project should be accepted or rejected.