Question
1. Rosewill Inc., is contemplating an electric Food Drying project which is expected to last for 6 years. Using the profitability index rule, what is
1. Rosewill Inc., is contemplating an electric Food Drying project which is expected to last for 6 years. Using the profitability index rule, what is the lowest annuity cash flow necessary to approve the Food Drying project if it involves an outlay of $90,700 today? Note: Rosewills required return is 8.5%.
2. Today, Northwest Agricultural is investing $31,300 in a pears project with a cost of capital of 8.3%. The pears project will produce cash flows of $11,850 and $12,400, over the next two years, respectively. During its final two years, the pears project will produce cash flows of $15,500 and $10,000, respectively. What is the profitability index of the 4-year pears project?
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