Calculating Profi tability Index Bill plans to open a self-serve grooming center in a storefront.

The grooming equipment will cost $160,000, to be paid immediately. Bill expects aftertax cash infl ows of $40,000 annually for seven years, after which he plans to scrap the equipment and retire to the beaches of Nevis. The fi rst cash infl ow occurs at the end of the fi rst year.

Assume the required return is 15 percent. What is the project’s PI? Should it be accepted?

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