Capital Budgeting

XYZ Corp is evaluating the purchase of a new machine with the following cash flows:

Yearly Cash Flows:

• Year 1: $10,000
• Year 2: $12,000
• Year 3: $15,000
• Year 4: $18,000

Initial investment is $40,000. The company’s WACC is 12%.

Requirements:

1. Calculate the payback period.
2. Determine the discounted payback period.
3. Compute the NPV.
4. Calculate the profitability index.
5. Suggest if the project should be accepted.