Find npv and the profitability index

Reference no: EM1375499

A team wants to decide if they should sign on a prospect to a 5-year contract. To go ahead they must spend $500,000 for a signing bonus and $ 5,000,000 spread over 5 years. The prospect will total the company an estimated $2,000,000 each year over the 5-year life of the contract. The teams cost of capital is 17 percent. Suppose that cash inflows occur at the end of the year.

Evaluate the NPV, and the Profitability Index (PI) for this project. Could this project be undertaken?

Reference no: EM1375499

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