The cost of capital for Patel plc is 14 per cent. The managers are considering a three-year project that will cost $100 000. 

The net cash flows for the project are expected to be:

The extracts from the present value tables for $1 are:

a. Calculate the discounted payback period for the project. 

b. Calculate the IRR for the project. 

c. Should the managers of Patel plc undertake the project? Explain your answer.

Transcribed Image Text:

Year 1 $40 000 Year 2 $45 000 Year 3 $50 000