You are evaluating a potential project for your firm. The project requires an up-front investment of $20,000 and will generate cash inflows of $5,000 at the end of each of the next five years. You estimate the projects risk-adjusted cost of capital at 6%. What is the projects NPV? What does the NPV decision rule says about this project. What is the projects IRR? What does the IRR rule say about this project? LO3

NPV = $1,061.82, the NPV rule says to accept the project; IRR = 7.93%, the IRR rule says to accept the project.

NPV = $2,602.19, the NPV rule says to accept the project; There is no IRR for this project.

NPV = $5,000, the NPV rule says to accept the project; IRR = 5.12%, the IRR rule says to reject the project.

NPV = $5,000, the NPV rule says to reject the project; IRR = 5.12%, the IRR rule says to reject the project