Problem:
Suppose Palmer Properties is considering investing $1 million today (i.e., C0 =-1,000,000) on a new project that is expected to last for 10 years. The project is expected to generate annual cash flows of C1 = -250,000; C2 = 150,000, C3 = 200,000 and then $250,000 for period C4 through C10. If the discount rate is 9% and management's payback period cutoff is 6 years:
Required:
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 explain comprehensively and give step by step solution.