IBM is evaluating a project that involves an initial investment of $700,000 The asset is depreciated over five years at 20 per year The projected cash flows are as follows Year Inflow ($) Outflow ($) Year 1 230,000 95,000 Year 2 240,000 100,000 Year 3 250,000 105,000 Year 4 260,000 110,000 Year 5 270,000 115,000 a What is the payback period b Calculate the internal rate of return (IRR) c Assuming a cost of capital of 10 , what is the net present value (NPV) of the cash flows d Should IBM accept the project

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Question: IBM is evaluating a project that involves an initial investment of $700,000. The asset is depreciated over five years at 20% per year. The projected

IBM is evaluating a project that involves an initial investment of $700,000. The asset is depreciated over five years at 20% per year. The projected cash flows are as follows:

Year	Inflow ($)	Outflow ($)
Year 1	230,000	95,000
Year 2	240,000	100,000
Year 3	250,000	105,000
Year 4	260,000	110,000
Year 5	270,000	115,000

a. What is the payback period?
b. Calculate the internal rate of return (IRR).
c. Assuming a cost of capital of 10%, what is the net present value (NPV) of the cash flows?
d. Should IBM accept the project?

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