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ABC Ltd is considering a project that requires an initial investment of $200,000. The project is expected to yield annual cash inflows of $50,000 for

ABC Ltd is considering a project that requires an initial investment of $200,000. The project is expected to yield annual cash inflows of $50,000 for 5 years. The cost of capital is 10%. Below are the present value factors:

Year

PV Factor at 10%

1

0.909

2

0.826

3

0.751

4

0.683

5

0.621

Requirements:

  1. Calculate the total present value of cash inflows.
  2. Compute the NPV.
  3. Determine the payback period.
  4. Calculate the profitability index.
  5. Assess whether the project should be undertaken.

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