IBM is evaluating a project that involves an initial investment of $250,000 The asset is depreciated over five years at 20 per year The cash flows are expected to be Year Inflow ($) Outflow ($) Year 1 90,000 35,000 Year 2 100,000 40,000 Year 3 110,000 45,000 Year 4 120,000 50,000 Year 5 130,000 55,000 a What is the payback period b Calculate the internal rate of return (IRR) c Assuming a cost of capital of 9 , what is the net present value (NPV) of the cash flows d Should IBM proceed with the project

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Question: IBM is evaluating a project that involves an initial investment of $250,000. The asset is depreciated over five years at 20% per year. The cash

IBM is evaluating a project that involves an initial investment of $250,000. The asset is depreciated over five years at 20% per year. The cash flows are expected to be:

Year	Inflow ($)	Outflow ($)
Year 1	90,000	35,000
Year 2	100,000	40,000
Year 3	110,000	45,000
Year 4	120,000	50,000
Year 5	130,000	55,000

a. What is the payback period?
b. Calculate the internal rate of return (IRR).
c. Assuming a cost of capital of 9%, what is the net present value (NPV) of the cash flows?
d. Should IBM proceed with the project?

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