The NPV of the project cost is 250000.
What is the NPV of a future return?
You have to discount the future returns because of the fact that a dollar today is going to be worth $1.05 next year, 1*(1.05)^2 after two years, and so on. So conversely getting a dollar payback from my investment today a year from now is only worth 1 / (1.05) right now
(assuming I can count on my 1.05 growth rate).
There is a formula for NPV that you should look up. There are probably several formulas for NPV's and future values of single transactions and periodic transactions you should be familiar with. There is likely a reference sheet or summary of them somewhere in the book. You should know where.
Figure out all the NPV's of the initial cost (negative) and all the returns (each positive).
Then figure out what annual return would give the same NPV. You should have a formula for the NPV of a repeating amount, and solve that.
What would you call that answer? What does it help you conclude?
