Problem:
X Inc has a project with 10 year life. The project requires a $1.2M investment in equipment. At the end of 10 years, the project is terminated and the equipment has no salvage value. NOI each year as follows: sales: 1.7M, Variable Costs: 1.2M, Contrib. Margin: 500K, Fixed Costs: 200K, Depreciation: 120K, total fixed: 320K, NOI: 180K. All of the above except deprecate are cash flows. Company's real rate of return is 12%.
Required:
Question 1: What is project's net Present Value?
Question 2: What is IRR to the nearest percent?
Question 3: What is payback period?
Question 4: What is the simple Rate of Return?
Note: Please provide reasons to support your answer.