Question text You are considering a project with the following cash flows: t=0 -$99,990 t=1 $65,234...

Question text

You are considering a project with the following cash flows:

t=0 -$99,990

t=1 $65,234

t=2 $63,990

Your company has a policy of using the profitability index (PI) to assess similar projects. Based on the policy, only projects returning at least $1.0575 in today's dollars for every $1 invested may be accepted. If the required rate of return of 14.925% is applied to this project, what would be your recommendation? Your company is in the 34% tax bracket, and the project's asset is depreciated on a straight-line basis. What would be your decision? Why?

Expert Solution

jeff jeffy answered 2 years ago

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