NPV / IRR homework question
1. Jackson Company is considering the investment in a computer system. The company estimates that it will require an initial outlay of $1,200,000. Other cash flows will be as follows:
Year 1 |
($600,000) |
Year 2 |
150,000 |
Year 3 |
620,000 |
Year 4 |
725,000 |
Year 5 |
800,000 |
Required:
Assuming the company limits its analysis to five years, should the company consider this investment? Calculate the net present value of this project with a required rate of return of seven percent. Also, does your answer change if the required rate of return is 12 percent?