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Problem 12-2: Profitability Index (PI) and Payback Period A firm is considering a major expansion that will cost SAR 15,000,000. Annual cash flows from the
| Problem 12-2: Profitability Index (PI) and Payback Period |
|
| A firm is considering a major expansion that will cost SAR 15,000,000. |
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| Annual cash flows from the project are expected to be SAR 3,500,000 for 7 years. | |
| The firm uses a discount rate of 8%. It accepts the project if the projects payback is less than 6 years. | |
| Calculate the Profitablility Index (PI) and the Payback Period of the project and determine if the project is acceptable based on PI and the Payback Period decision criteria. | |
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