An investor is considering a capital expenditure for new production facilities. The relevant cash flows are listed below:

Initial Investment = $225,000

Year Cashflow

1 $76,000

2 81,000

3 78,000

4 88,000 5. 81,000

a. Calculate the firms profitability index. Assume a cost of capital of 11.6%.

b. Calculate the project's internal rate of return (interpolate your results to two decimal points). Is this an acceptable project? Why or why not?