Q2: You are reviewing a new project and have estimated the following cash flows: Year 0: CF = -200,000 Year 1: CF = 60,000 NI = 12,000 Year 2: CF = 80,000 NI = 4000 Year 3: CF = 90,000 NI = 30,000 Average Book Value = 50,000 Assume You require an average accounting return of 25% in 3 years. What is the ARR? Should we accept the project?

Q3: What is the profitability index (PI) for a new project that estimated a present value of future cash flows 400,000$ and initial investment 200,000$? Calculate the profitability index (PI) Should we accept the project?