Problem:
Calliope Industries is evaluating a capital project with the following cash flows: Year 1, $500; Year 2, $730; Year 3, $960; Year 4, $1,290, and Year 5, $1,740. The project is expected to cost $3,290 and the firm's cost of capital is 9.75%.
Required:
Question 1: What is the net present value of the project?
Question 2: Should Calliope accept this project?
Question 3: What if the cost of capital were 12.25%?
Question 4: What is the NPV? Accept or reject the project?
Note: Show supporting computations in good form.