Question 6

GHI Corporation is considering a project with the following details:

• Initial investment: $400,000
• Annual revenues: $150,000
• Annual operating costs: $50,000
• Project life: 6 years
• Depreciation: Straight-line over project life
• Tax rate: 28%
• Discount rate: 9%

Calculate:

1. Annual depreciation expense.
2. Annual after-tax cash flows.
3. Net Present Value (NPV).
4. Internal Rate of Return (IRR).
5. Profitability Index (PI).