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QUESTION
A project requires a net investment of $450,000. It has a profitability index of 1.25 based on the firm's 12 percent cost of capital. Determine the...
3. A project requires a net investment of $450,000. It has a profitability index of 1.25 based on the firm's 12 percent cost of capital. Determine the net present value of the project.
PI = PV of NCF/NINV = 1.25 = PV of NCF/$450,000PV of NCF = $562,500NPV = PV of NCF - NINV = $562,500 -$450,000 = $112,500