Windrunner Corp. is considering a new machine that requires an initial investment of $1,200,000 installed and has a useful life of 10 years. The expected annual after-tax cash flows for the machine are $150,000 during the first 4 years, $200,000 during years 5 through 8 and $250,000 during the last two years.

(v) Calculate the Profitability Index (PI) at the following required rates of return:

(a) 6% (b) 8% (c) 10% (d) 12%

(vi) Using IRR and NPV criterion, comment if the project should be accepted or rejected at the following required rates of return:

(a) 6% (b) 8% (c) 10% (d) 12%

(vii) Plot the Net Present Value profile (NPV on Y axis and rates of return on X-axis).