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  3. xyz corp is evaluating a new project. the initial

XYZ Corp is evaluating a new project. The initial investment required is $300,000. The project...

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Accounting

XYZ Corp is evaluating a new project. The initial investment required is $300,000. The project is expected to generate the following annual cash flows:

  • Year 1: $90,000
  • Year 2: $120,000
  • Year 3: $110,000
  • Year 4: $100,000
  • Year 5: $80,000

The project will be depreciated using the straight-line method over its 5-year life with no salvage value. The tax rate is 25%. Required:

  1. Compute the Payback Period (PBP) and ARR
  2. Calculate NPV and PI, assuming the cost of capital is 8%
  3. Determine the IRR
  4. Analyze the sensitivity of the NPV to changes in the discount rate

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