Cassidy and Sons is reviewing a project with an initial cash outflow of $250,000. An additional $100,000

Question:

Cassidy and Sons is reviewing a project with an initial cash outflow of $250,000. An additional $100,000 will have to be invested after the first year, followed by an additional investment of $50,000 at the end of the second year. Beginning at the end of year 3, the project is expected to generate cash flows of $90,000 per year for the next eight years.

a. Calculate the project’s payback period, IRR, and its NPV and PI at a cost of capital of 8%.

b. What concerns might Cassidy have regarding this project beyond the financial calculations from part (a)?

Cost Of Capital
Cost of capital refers to the opportunity cost of making a specific investment . Cost of capital (COC) is the rate of return that a firm must earn on its project investments to maintain its market value and attract funds. COC is the required rate of...