Reference no: EM132587236

Tropic Investments is considering a project involving an initial cash outlay for an asset of $200,000. The asset is depreciated over five years at 20% per year (based on the value of the investment at the beginning of each year).

The cash flows from the project are expected to be as follows:

                                   Inflow                        Outflow

Year 1                   $ 75,000               $30,000
Year 2                   90,000                   40,000
Year 3                   100,000               45,000
Year 4                   100,000                50,000
Year 5                     75,000                40,000

Question a. What is the payback period?

Question b. What is the return on investment (each year and average)?

Question c. Assuming a cost of capital of 10% and ignoring inflation, what is the net present value of the cash flows?

Question d. Should the project be accepted?