Based on the profitability index rule

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Reference no: EM131932340

1. You estimate that a project will cost $58,400 and will provide cash inflows of $18,000, $21,000, and $28,600 for years 1 to 3. Based on the profitability index rule, should the project be accepted if the discount rate is 17 percent? Why or why not?

2. A farmer buys a new tractor for $35,000. He makes a down payment of $10,000 and finances the balance of 8.5% APR over 48 months. Before making the 12th payment, the farmer decides to pay the remaining balance on loan. How much interest will the farmer save (use the actuarial method)?

Reference no: EM131932340

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