DEF Ltd. is looking to invest $350,000 in a project that is expected to generate the following cash flows:
•Year 1: $60,000
•Year 2: $70,000
•Year 3: $80,000
•Year 4: $90,000
•Year 5: $100,000
•Year 6: $110,000
The company uses straight-line depreciation, and the tax rate is 25%. The discount rate is 9%.
Required:
1.Calculate the Payback Period (PBP).
2.Calculate the Average Rate of Return (ARR).
3.Calculate the Net Present Value (NPV).
4.Calculate the Internal Rate of Return (IRR).
5.Calculate the Profitability Index (PI).