Reference no: EM132875284

Question - Hunter, Inc., is considering a project that would have a five-year life and would require a $550,000 investment in equipment. At the end of five years, the project would terminate and the equipment would have no salvage value. The project would provide net operating income each year as follows:

Sales $750,000

Variable Expenses 500,000

Contribution Margin 250,000

Fixed Expenses:

Fixed out-of-pocket cash expenses 50,000

Depreciation 80,000 130,000

Net Operating Income $120,000

All of the above items, except for depreciation, represent cash flows. The company's required rate of return is 10%.

Required -

a. Compute the project's net present value.

b. Compute the project's internal rate of return to the nearest whole percent.

c. Compute the project's payback period.