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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
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?
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