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  3. a firm is evaluating a new project which requires

A firm is evaluating a new project which requires an investment of $500,000 and will...

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Accounting

A firm is evaluating a new project which requires an investment of $500,000 and will generate cash inflows of $120,000 annually for 7 years. The project will be depreciated on a straight-line basis over its useful life. The tax rate is 30%, and the required rate of return is 12%.

Required:

  1. Compute the Annual Depreciation Expense.
  2. Calculate the Accounting Rate of Return (ARR).
  3. Determine the Payback Period (PBP).
  4. Calculate the Net Present Value (NPV).
Calculate the Profitability Index (PI).

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