The SL High Tech is planning a new investment project which is expected to yield cash inflows of $395,000 per year in Years 1 through 3, $286,000 per year in Years 4 through 6, and $278,000 in Years 7 through 10. This investment will cost the company $1,850,000 today (initial outlay). We assume that the firm's cost of capital is 7.5%.
(1) Draw a time line to show the cash flows of the project.
(2) Compute the projectâs payback period, net present value (NPV), profitability index (PI), internal rate of return (IRR), and modified internal rate of return (MIRR).
(3) Discuss whether the project should be taken.

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Question:
The Sanders Electric Company is evaluating two projects for possible inclusion in the firmâs capital budget. Project M will require a $37,000 investment while project Oâs investment will be $46,000. After-tax cash inflows are estimated as follows for the two projects:
Year	Project M	Project O
1	$12,000	$10,000
2	12000	10000
3	12000	15000
4	12000	15000
5	15000

a.	Determine the payback period for each project.
	Payback (M) =
	Payback (O) =

b.	Calculate the net present value and profitability index for each project based on a 10 percent cost of capital. Which, if either, of the project is acceptable?
	NPV (M) =
	PI (M) =
	NPV (O) =
	PI (O) =

c.	Determine the internal rate of return and modified internal rate of return for Projects M and O.
	IRR (M):
	IRR (O):
	MIRR calculation of project M:
	MIRR calculation of project O:

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