Explain the npv-irr-mirr and payback period

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A firm is evaluating a project with an initial investment of $1,000,000 and an expected life of 3 years. Other relevant estimates are:

Annual sales: $600,000

Annual costs, excluding depreciation, will be 50% of sales

Tax rate: 21%

Before tax salvage value: $300,000

Annual interest expense: $30,000

WACC: 12%

Net working capital: 5% of the change in sales

The asset will be depreciated using the 5-year MACRS schedule as follows:

Year Depreciation (%)

1 33%

2 45%

3 15%

4 7%

Apply the following techniques: NPV, IRR., MIRR, and Payback Period (Assume a two year payback requirement). Should the project be accepted? Explain your decision

Reference no: EM133075428

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