Question: A firm is considering a project requiring an initial outlay of $20,000 and has the following expected cash inflows: Year 1: $7,000 Year 2: $8,000

A firm is considering a project requiring an initial outlay of $20,000 and has the following expected cash inflows:

  • Year 1: $7,000
  • Year 2: $8,000
  • Year 3: $9,000
  • Year 4: $10,000

With a discount rate of 16%, answer the following:

  1. Calculate the NPV.
  2. Determine the Discounted Payback Period.
  3. Assess the project’s feasibility based on NPV and Discounted Payback Period.
  4. Discuss potential risks associated with the project’s cash flow estimates.

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