ETP Co. has an investment opportunity costing $80,000 that is expected to yield the following cash flows over the next ten years:
Year 1: $15,000
Year 2: $15,000
Year 3: $15,000
Year 4: $15,000
Year 5: $15,000
Year 6: $15,000
Year 7: $13,000
Year 8: $14,000
Year 9: $16,000
Year 10: $12,000
Part A: Find the Net Present Value (NPV) and Profitability Index (PI) of the investment at a discount rate of 10%.
Part B: Does this capital project appear to be a favorable investment?Why or Why not?
Part C: If a second project (X) with a profitability index of 1.85 was also being considered, which project (ETP or X) would be best and WHY?