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You are reviewing a proposal to purchase equipment for $546,000. The new equipment will save $132,000 in after tax operating costs during the first year.
You are reviewing a proposal to purchase equipment for $546,000. The new equipment will save $132,000 in after tax operating costs during the first year. Annual savings, after tax, are expected to increase by $15,000 per year during the next four years, reaching $192,000 for year five. The equipment has no salvage value. What is the projects profitability index if the cost of capital is 11% (
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