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Compute the profitability index

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Reference no: EM132484601

Farrah Corporation is considering two projects (see below). For your analysis, assume these projects are mutually exclusive with a required rate of return of 12%.

                                            Project 1   Project 2

Initial investment          $185,000           $1,100,000

Cash inflow Year 1         $230,000         $1,450,000

Question 1: Compute the following for each project:

  1. NPV (net present value)
  2.  PI (profitability index)
  3.  IRR (internal rate of return)

Reference no: EM132484601

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