What is the net present value of project

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Suppose Palmer Properties is considering investing $3.6 million today (i.e., C0 = -3,600,000) on a new project that is expected to last for 8 years. The project is expected to generate annual cash flows of C1 = -200,000; C2 = 400,000, C3 = 750,000 and then $900,000 for period C4 through C8. If the discount rate is 7% and management’s payback period cutoff is 5 years:

(a) What is the payback period for the project?

(b) What is the net present value of the project ?  

(c) What is the internal rate of return on the project ?

(d) Under which method(s) above should the company accept the project (applying the acceptance rules)? Explain.

Reference no: EM131533371

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