a.
To determine: Whether new project should be undertaken.
Capital Budgeting:
Decision related to the investment for the long run is called capital budgeting. Capital budgeting includes the investment in the heavy machinery and information technology.
The net present value is differential amount between the net
b.
To determine:
Internal rate of return (IRR)
The internal rate of return is that discounting rate of capital budgeting in which the NPV of the cash flow of the project comes equal to zero.
c.
To explain: Interpretation of profitability index
Profitability index:
Profitability index shows whether a project is worth following or not by dividing net present value cash inflow from initial investment.
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