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Finance Mini Project

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The XYZ Utility Corporation is planning on a new project which is expected to yield cash inflows of $150,000 per year in Years 1 through 3, $165,000 per year in Years 4 through 8, and $95,000 in Years 9 through 12. This investment will cost the company $620,000 today (initial outlay). The firm's cost of capital is 8.8%.
(1) Draw a time line to show the cash flows of the project.
(2) Compute the project's payback period, net present value (NPV), profitability index (PI), and internal rate of return (IRR).
(3) Discuss whether the project should be undertaken. If so, why. If not, why not!

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