Question: A company is evaluating a capital project with an initial cost of $800,000 and expected net cash inflows of $180,000 per year for 6 years.

A company is evaluating a capital project with an initial cost of $800,000 and expected net cash inflows of $180,000 per year for 6 years. The tax rate is 35% and the required rate of return is 15%.

Requirements:

  1. Calculate the NPV of the project.
  2. Determine the IRR.
  3. Compute the payback period.
  4. Assess the project's ARR.
  5. Discuss the decision to invest based on the NPV and IRR results.

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