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Facebook, Inc. is considering a project with an initial cash outlay of $350,000. The asset is depreciated over five years at 20% per year. The

Facebook, Inc. is considering a project with an initial cash outlay of $350,000. The asset is depreciated over five years at 20% per year. The projected cash flows are as follows:

Year

Inflow ($)

Outflow ($)

Year 1

100,000

40,000

Year 2

110,000

45,000

Year 3

120,000

50,000

Year 4

130,000

55,000

Year 5

140,000

60,000

a. What is the payback period?
 b. Calculate the profitability index (PI).
 c. Assuming a cost of capital of 10%, what is the net present value (NPV) of the cash flows?
 d. Should Facebook undertake the project?

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