ABC is considering the purchase of equipment for $900,000.Useful life estimated at 6 years (no salvage value).Annual revenues are expected to increase by $400,000 with estimated expenses increasing by $190,000. (excludes Depreciation (S-L)).

ABC requires a rate of return of 9%. (cost of capital = 9%)Compute ARR? NPV? Profitability Index (similar projects in the company portfolio have an index of .75)? Payback (3 years)? Would you accept this project?