Problem:
Danny Zuteck is considering an investment which will cost him $120,000. The investment produces no cash flows for the first year. In the second year the cash inflow is $35,000. This inflow will increase to $55,000 and then to $75,000 for the following two years. Danny demands a 10% rate of return and has a required discounted payback of three years.
Required:
Question: Should Danny accept the project?
Note: Explain all calculation and formulas.