Question: Fijisawa, Inc., is considering a major expansion of its product line and has estimated the following free cash flows associated with such an expansion. The initial outlay associated with the expansion would be $1,950,000, and the project would generate free cash flows of $450,000 per year for six years. The appropriate required rate of return is 9 percent.
Q1. Calculate the net present value.
Q2. Calculate the profitability index.
Q3. Calculate the internal rate of return.
Q4. Should this project be accepted?