Question: DEF Inc. is evaluating a project that requires an initial outlay of $600,000. The project will generate cash inflows of $120,000 annually for 6 years.

DEF Inc. is evaluating a project that requires an initial outlay of $600,000. The project will generate cash inflows of $120,000 annually for 6 years. The company's discount rate is 11%. The present value factors are:

Year

PV Factor at 11%

1

0.901

2

0.812

3

0.731

4

0.659

5

0.593

6

0.534

Requirements:

  1. Compute the total present value of cash inflows.
  2. Calculate the NPV.
  3. Determine the payback period.
  4. Calculate the IRR.
  5. Recommend whether the project should be accepted.

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