Glamazon, Inc. is considering a project that would have a ten-year life and would require a $2,458,000 investment in equipment. At the end of ten years, the project would terminate, and the equipment would have a salvage value of $20,000. The project would require additional working capital $25,000 in the form of an increase in the minimum balance required by their bank and this working capital would be released at the end of the project. The project would provide net income each year as follows:

Sales............................................................... ....................................................................... $2,000.000

Less variable expenses................................... 1,100,000

Contribution margin...................................... 900,000

Less fixed expenses:

Fixed out-of-pocket cash expenses... $500,000

Depreciation...................................... 150,000 650,000

Net income.................................................... $ 250,000

All of the above items, except for depreciation, represent cash flows. The companys required rate of return is 10%.

Required:

1. Compute the projects net present value.
2. Compute the projects internal rate of return, to the nearest percentage.
3. Compute the projects payback period.
4. Compute the simple rate of return.
5. Should the company accept the project? Why or why not?