A firm is considering a capital investment of $200,000 in a new product line. The project will have a life of 7 years and is expected to generate annual cash inflows of $45,000. The firm's discount rate is 11%.

Requirements:

1. Calculate the payback period.
2. Determine the Net Present Value (NPV).
3. Compute the internal rate of return (IRR).
4. Calculate the profitability index (PI).
5. Evaluate whether the firm should proceed with the investment based on the NPV and IRR.