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Scenario: A company has the following projected cash inflows and outflows for a new project: Year Cash Inflows Cash Outflows 0 $0 $5,000 1 $1,500

Scenario: A company has the following projected cash inflows and outflows for a new project:

Year

Cash Inflows

Cash Outflows

0

$0

$5,000

1

$1,500

$500

2

$1,800

$600

3

$2,200

$700

4

$2,600

$800

5

$3,000

$900

The required rate of return is 12%.

Requirements:

  1. Calculate the Net Present Value (NPV) of the project.
  2. Determine if the project should be accepted based on NPV.
  3. Compute the Internal Rate of Return (IRR).
  4. Calculate the Payback Period.
  5. Determine the Profitability Index (PI).

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