Ren-Tex Equipment rental is performing a financial study to determine the viability of constructing a new...

Ren-Tex Equipment rental is performing a financial study to determine the viability of constructing a new equipment rental and maintenance facility in Dallas. The management team has estimated the new facility will initially cost $4,000,000 and have positive cash flows of $400,000 in year 1, $700,000 in year 2, and $600,000 years 3 through 7. The required discount rate is 7% over the 7 year life of the facility.

A) Calculate the Net Present Value (NPV).

B) Calculate the Profitability Index (PI).

C) Calculate the Internal Rate of Return (IRR).

D) Should this project be accepted?

Expert Solution

jeff jeffy answered 8 months ago

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