ABC Limited Company is looking to invest in a project. The cost of that project is $60,000 and the cash inflows and outflows of the project for 5 years, are shown in Table 1 below. The company’s WACC is 7%.Years Cash InflowsCash Outflows0 (Initial Outlay) $60,000.001$20,000.00$5,000.002$21,000.00$2,000.003$22,000.00$2,000.004$14,000.00$2,000.005$10,000.00$1,000.00 Calculate theProfitability Index (PI) Net Present Value (NPV), and estimate the Internal Rate of Return (IRR) of the Project using the given interest rate and 9%.

YearsCash inflowsCash outflows0 (Initial…

Answered: ABC Limited Company is looking to…

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 19EA: Redbird Company is considering a project with an initial investment of $265,000 in new equipment...

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ABC Limited Company is looking to invest in a project. The cost of that project is $60,000 and the cash inflows and outflows of the project for 5 years, are shown in
Table 1 below. The company’s WACC is 7%.

Years	Cash Inflows	Cash Outflows
0 (Initial Outlay)		$60,000.00
1	$20,000.00	$5,000.00
2	$21,000.00	$2,000.00
3	$22,000.00	$2,000.00
4	$14,000.00	$2,000.00
5	$10,000.00	$1,000.00

Calculate the

Profitability Index (PI)
Net Present Value (NPV), and estimate the Internal Rate of Return (IRR) of the Project using the given interest rate and 9%.

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