Question $4$

Consider a project costing S$$4,000,000$ for a machine today $($i$.$e$.,$ Year $0)$ and delivering cash flow from assets of S$$1,332,000,$ S$$932,000,$ S$$1,258,000,$ S$$1,540,000$ over the next $4$ years $($starting from the next year, i$.$e$.,$ Year $1).$ Due to the fast$-$moving nature of the products, it is anticipated that after $4$ years, the product would be discontinued, and the machine, $100\%$ depreciated by then, would be scrapped without value. The tax rate is $17\mathrm{.}5\%,$ the expected rate of return is $10\mathrm{.}87\%$ and management team usually wants to recuperate its investment within $4$ years.

Question $4$a

Calculate the NPV and indicate whether or not the project should be launched.

Question $4$b

Without any calculation, infer from the above question whether the IRR of the project

is larger, smaller or equal to the expected rate of return. Explain your answer.