Problem: Projected cash flows for the proposed Solar Energy ("SE") Project, with a four-year life, are:
1. Initial expenditure of $100,000 now.
2. Projected cash inflow of $40,000 at end-of-each-of-next-three-years.
3. Projected cash inflow of $140,000 at end-of-fourth-year.
Key inputs for three of the different capital budgeting criteria (in addition to the projected cash flows) are:
1. Maximum Payback Period of 2.0 years.
2. Discount Rate for net present value analysis of 15.0%.
3. Hurdle Rate for internal rate of return analysis of 15.0%.
Required to do:
Question 1: What is the project's Payback period and should the project be accepted or rejected based on it?
Question 2: What is the NPV for the proposed project and should it be accepted or rejected based on this criteria?
Question 3: What is the IRR for the proposed project and should it be accepted or rejected based on this criteria?