Question
Goanna Ltd is considering a new project with the following expected after tax cash flows: Year Cash flow 0 -$150,000 1 $39,75 2 $41,250 3
Goanna Ltd is considering a new project with the following expected after tax cash flows:
| Year | Cash flow |
| 0 | -$150,000 |
| 1 | $39,75 |
| 2 | $41,250 |
| 3 | $44,350 |
| 4 | $47,550 |
| 5 | $50,000 |
If the company has a required rate of return of 11.5%, calculate the Net Present Value (NPV) and Profitability Index (PI) of the project (show answers correct to two decimal places) and explain if the company should choose this project or not.
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Fundamentals of Financial Management
Authors: Eugene F. Brigham, Joel F. Houston
Concise 6th Edition
324664559, 978-0324664553
