Question
Beximco Pharmaceuticals is looking at a new project that has the following cash inflows. Year 1: CF1 = $150,000. Year 2: CF2 = $170,000. Year
Beximco Pharmaceuticals is looking at a new project that has the following cash inflows.
Year 1: CF1 = $150,000.
Year 2: CF2 = $170,000.
Year 3: CF3 = $120,000
Year 4: CF4 = $140,000.
The project is estimated to cost $300,000 upfront and will incur an additional cash outflow of
$20,000 and $40,000 respectively at the end of year 2 and 4 for security maintenance purposes.
The applicable discount rate is 9%. Calculate the following numbers.
i) The Net Present Value (NPV) of the proposed Project.
ii) The payback period
iii) The discounted payback period
iv) The profitability index
v) Based on your answers from part i) to iv) should Beximco Pharmaceuticals accept the
project? If yes, justify your choices briefly.
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