A transportation company is evaluating the purchase of electric buses. The projected cash flows are as follows:

Initial Investment: $900,000

Annual Cost Savings and Maintenance Costs:

•Year 1: Savings $100,000, Costs $20,000

•Year 2: Savings $120,000, Costs $25,000

•Year 3: Savings $140,000, Costs $30,000

•Year 4: Savings $160,000, Costs $35,000

•Year 5: Savings $180,000, Costs $40,000

Discount Rate: 9%

Requirements:

1.Calculate the payback period.

2.Compute the net present value (NPV).

3.Determine the profitability index (PI).

4.Assess the internal rate of return (IRR).

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