Company A is considering a project that is expected to last six years. It will generate cash flow before taxes and depreciation of $23,000 per year. It requires the initial purchase of equipment costing $60,000, which will be depreciated over four years on straight-line basis. The relevant tax rate is 25%. Cost of capital is 20%. There is no residual value of the project.
Required:
(i) Calculate the project's net present value, payback period, discounted payback period, internal rate of return and accounting rate of return (on total investment)
(ii) Based on the results obtained in (i) above, advise if this project should be accepted. Why or why not?