Bill plans to open a do-it-yourself taco and margarita station in a hotel main lobby for guests who have to wait a long time to check in. The equipment will cost $50,000. Bill expects the net cash inflows to be $15,000 annually for 8 years and then sell the equipment for $2,500 at the end of year 8. He will then retire to the beaches of Jamaica.

a) What is the Net Present Value (NPV) of this project with a 10% discount rate? Should we accept/reject this project?

$131,084.1370 / Reject

$31,084.1370 / Reject

$131,190.1614 / Accept

$31,190.1614 / Accept

b) What is the Internal Rate of Return (IRR) of this project? A comparable project is earning 30% .Should we accept/reject this project?

25.1964% / Reject

26.0000% / Accept

25.2574% / Reject

25.2574% / Accept

c) What is the Profitability Index (PI) of this project with a 10% discount rate? Should we accept/reject this project?

1.6238 / Accept

1.6238 / Reject

1.6217 / Accept

.6238 / Reject