Fuzzy Badger Transport Company is considering investing $600,000 in a project that is expected to...
50.1K
Verified Solution
Link Copied!
Question
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.
Answer & Explanation
Solved by verified expert
Get Answers to Unlimited Questions
Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!
Membership Benefits:
Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
