ABC Company Limited is looking to invest in one of the Project with an initial outlay of $50,000 and cash inflows and outflows of the project for 5 years, as shown in the below table. The company normally use 5% as a discount rate for such a project.

Calculate:

a) Payback period model (5 marks)

b) Discounted payback model (5 marks)

c) Net Present Value (NPV) (5 marks)

d) Profitability Index (PI) (2 marks)

e) Identify and explain two reasons why a company will use Profitability Index (PI) to make a decision on projects