Question: A construction company is evaluating a real estate development project: Initial Investment: $2,000,000 Net Cash Inflows: Year 1: $400,000 Year 2: $500,000 Year 3: $600,000

A construction company is evaluating a real estate development project:

Initial Investment: $2,000,000

Net Cash Inflows:

  • Year 1: $400,000
  • Year 2: $500,000
  • Year 3: $600,000
  • Year 4: $700,000
  • Year 5: $800,000

Discount Rate: 10%

Requirements:

  1. Calculate the Payback Period.
  2. Determine the NPV.
  3. Compute the IRR.
  4. Assess the profitability index.
  5. Conduct a sensitivity analysis with a 3% increase in the discount rate.

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