Your team just completed the cost estimates for your project. If accepted, you would need an initial investment of $200,000 in Research and Development. There will be construction costs in the first year of $350,000. Annual sales of $300,000 will begin in year 2 and continue through year 5. Your annual operating costs will be $50,000 for each year you sell the product. If the discount rate is 12%, what is the NPV for this project? Should you invest in this project based on the NPV? Set initial investment as occurring in Year 0.

What is the IRR for the project in problem #6? If the Minimum Attractive Rate of Return (MARR) is 20%, would you recommend investing in this project? Discuss any reasons that you might not invest in a project even if it exceeds the MARR.