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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:
- Calculate the total present value of cash inflows.
- Compute the NPV.
- Determine the payback period.
- Calculate the profitability index.
- Assess whether the project should be undertaken.
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