Problem:
Suppose Palmer Properties is considering investing $2 million today (i.e., C0 = -2,000,000) on a new project that is expected to last for 12 years. The project is expected to generate annual cash flows of C1 = -250,000; C2 = 200,000, C3 = 300,000 and then $350,000 for period C4 through C12. If the discount rate is 8% and management's payback period cutoff is 7 years:
Requirement:
Question 1: What is the payback period for the project?
Question 2: What is the net present value of the project?
Question 3: What is the internal rate of return on the project?
Question 4: Under which method(s) above should the company accept the project (applying the acceptance rules)? Explain
Note: Please show guided help with steps and answer.