Ursus, Incorporated, is considering a project that would have a ten-year life and would require a $1,000,000 investment in equipment. At the end of ten years, the project would terminate and the equipment would have no salvage value. The project would provide net operating income each year as follows (Ignore income taxes.):

All of the above items, except for depreciation, represent cash flows. The company's required rate of return is 12%.

Click here to view Exhibit 7B-1 and Exhibit 7B-2, to determine the appropriate discount factor(s) using the tables provided.

Required:

a. Compute the project's net present value.

b. Compute the project's internal rate of return to the nearest whole percent.

c. Compute the project's payback period.

d. Compute the project's simple rate of return.

Sales $2,000,000 Variable expenses 1,400,000 Contribution margin 600,000 Fixed expenses: Fixed out-of-pocket cash expenses $300,000 Depreciation Net operating income \begin{tabular}{lr} 100,000 & 400,000 \\ \hline$200,000 \end{tabular}