ABC Ltd is considering a capital investment with the following details:

• Capital cost: $750,000
• Useful life: 7 years
• Salvage value: $20,000
• Annual net operating income after taxes: $100,000
• Discount rates and cumulative factors:
  • 8%: 5.868
  • 10%: 5.334
  • 12%: 4.968
  • 14%: 4.628
  • 16%: 4.312

Requirements:

1. Calculate the internal rate of return (IRR).
2. Determine the net present value (NPV) at a 10% discount rate.
3. Compute the payback period.
4. Calculate the profitability index (PI).
5. Assess the impact on IRR if the initial investment is reduced by 5%.