The Meriweather Company Is Considering a Proposal That Would Require

Essay

The Meriweather Company is considering a proposal that would require a $9000 investment now, and a $4000 additional investment at the end of Year 4 that has not been included in the computation of the future net cash inflows shown below. Net cash inflows expected from the project are as follows:
$$\begin{array} { l r r r } \text { Year 1 } & \$ 2000 & \text { Year 5 } & \$ 1000 \\\text { Year 2 } & 0 & \text { Year 6 } & 6000 \\\text { Year 3 } & 4000 & \text { Year 7 } & 2000 \\\text { Year 4 } & 2000 & \text { Year 8 } & 2000\end{array}$$ Required:
(1) Calculate the project's payback period.
(2) If Meriweather's cost of capital is 12%, calculate the project's net present value.