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Tamim Products is planning to invest in an equipment to implement a cost-cutting proposal, The pre-tax cost reduction is expected to equal $8,500 for each
Tamim Products is planning to invest in an equipment to implement a cost-cutting proposal, The pre-tax cost reduction is expected to equal $8,500 for each of the five years of the project's tife. The equipment has an initial cost of $28,000 and belongs to a 25% ccA class. The company is in 30% tax bracket, the project's discount rate is 12%, and its salvage value is zero. The equipment will be sold to another company at the end of year 5 for $4,500. What is the project's profitability index (P)? (Use the half-year rule when calculating the CCA Fax Shield I E use 0.5 instead of 1.5 ) a. 0.81 b. 0.84 c. 0.92 d. 0.98 e. 1.03
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