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Fuzzy Badger Transport Company is considering investing $600,000 in a project that is expected to...

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Finance

Fuzzy Badger Transport Company is considering investing $600,000 in a project that is expected to generate the following net cash flows:

Year

Cash Flow
Year 1 $375,000
Year 2 $450,000
Year 3 $425,000
Year 4 $400,000

Fuzzy Badger uses a WACC of 7% when evaluating proposed capital budgeting projects. Based on these cash flows, determine this projects PI (rounded to four decimal places).

1.8608

2.2097

2.3260

1.9771

Fuzzy Badgers decision to accept or reject this project is independent of its decisions on other projects. Based on the projects PI, the firm should accept/reject? the project.

By comparison, the net present value (NPV) of this project is $ ? . On the basis of this evaluation criterion, Fuzzy Badger should invest/not invest? in the project because the project will/will not? increase the firms value.

When a project has a PI greater than 1.00, it will exhibit an NPV ; when it has a PI of 1.00, it will have an NPV equal to $0. Projects with PIs 1.00 will exhibit negative NPVs.

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