Corporate Finance
Corporate Finance
12th Edition
ISBN: 9781259918940
Author: Ross, Stephen A.
Publisher: Mcgraw-hill Education,
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Chapter 5, Problem 7QAP
Summary Introduction

Adequate Information:

The following information has been provided in the question:

Cost of grooming equipment = -$325,000

After tax cash inflows = $67,000

Time= 7 years

Rate of return =13%

To calculate: Computation of profitability index and weather the project should be accepted or not.

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9. Calculating Profitability Index Bill pians to open a self-serve grooming center in a storefront. The grooming equipment will cost $187,000. Bill expects aftertax cash inflows of $62,000 annually for seven years, after which he plans to scrap the equipment and retire to the beaches of Nevis, The first cash inflow ocurs at the end of the first year. Assume the required return is 15 percent. What is the project's PI? Should it be accepted?
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Corporate Finance

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