There is a project being considered that has an initial cost of $5,000. The first year profit is $500 and profits are expected to increase by 50% every year after that. Project costs are expected to be $1,000 for the first two years and then decrease by 5% every year after that. The project life is expected to be 10 years and the company MARR is 10%.
a) What is the payback period for this project?
b) What is the rate of return for this project?
c) What is the present worth of this project?
d) The project must be shortened to 6 years. Under this constraint, is the project worth doing and why?