A project is being evaluated with the following information:

• Initial investment: $900,000
• Project life: 9 years
• Annual net cash flows: $150,000
• Tax rate: 40%
• Depreciation: Straight-line method
• Discount rates and present value factors:
  • 7%: 6.515
  • 9%: 5.995
  • 11%: 5.537
  • 13%: 5.128
  • 15%: 4.758

Requirements:

1. Calculate the internal rate of return (IRR).
2. Determine the net present value (NPV) at a 9% discount rate.
3. Compute the payback period.
4. Calculate the accounting rate of return (ARR).
5. Perform a sensitivity analysis on NPV with ±5% changes in annual cash flows.

1. Question