Years Project A

0 -$8,750,000

1 2,500,000

2 2,500,000

3 2,000,000

4 2,000,000

5 1,500,000

6 1,500,000

7 1,500,000

Interest rate is 12.80%

calculate the NPV, IRR, profitability index (PI) and the payback period. For each capital budgeting decision tool, indicate if the project should be accepted or rejected, assuming that each project is independent of the others. Important Note: The venture capital folks, when considering payback period, have a firm maximum payback period of four years. This 4-year payback period has no impact on other capital budgeting analysis techniques, each is to be considered on its own. In other words, yes, all cash flows need to be considered for NPV, IRR, and PI.