Bill plans to open a do-it-yourself dog grooming center. The property and equipment will cost $40,000 in year 0. Bill expects the cash inflows to be $15,000 annually for the next 4 years, after which there will be no residual value left. The cost of capital for Bill is 10%.
1. What is the project's payback period? If Bill need to recover all the investment in 2.5 years, could the project be taken?
2. What is the project's NPV? Should it be accepted?
3. What is the project's PI? Should it be accepted?