A project's initial cost is $1,250,000. It is expected to produce cashflows of $300,000 for 6 years, as well as a cashflow of $100,000 in year 7.
a) (review) What is the project's payback period?
b) If the WACC is 11%, what is the NPV?
c) Based on the answer to b above, should the project be accepted or rejected? Why?
d) Based on the answer to c above, will the project increase the value of the firm, decrease it, or have no impact on the value of the firm?