Question 2

An investment opportunity involves the following annual cash flows:

Annual Cash Flows:

• Year 0: -$75,000
• Year 1: $10,000
• Year 2: $15,000
• Year 3: $20,000
• Year 4: $30,000
• Year 5: $40,000

Requirements:

1. Calculate the cumulative cash flow for each year.
2. Determine the payback period.
3. Calculate the Net Present Value (NPV) at a 10% discount rate.
4. Compute the Profitability Index (PI).
5. Evaluate if the investment is viable based on the NPV and PI.