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ABC Corp. is considering investing in a new manufacturing plant. The initial investment required is $3,500,000. The following cash inflows are expected over the next
ABC Corp. is considering investing in a new manufacturing plant. The initial investment required is $3,500,000. The following cash inflows are expected over the next five years:
- Year 1: $900,000
- Year 2: $1,200,000
- Year 3: $1,500,000
- Year 4: $1,000,000
- Year 5: $800,000
Requirements:
- Calculate the NPV of the project if the discount rate is 10%.
- Calculate the payback period of the project.
- Calculate the profitability index (PI).
- Should ABC Corp. proceed with the investment? Justify your answer using the calculations.
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