Reference no: EM132187912

A firm wishes to secure a contract that is expected to yield the after-tax net cash flows at the end of each year listed below. To secure the contract, the firm must spend $30,000 today to retool its plant. This retooling will have no salvage value at the end of eight years. The firm needs to earn at least a 9% rate of return on its investments. • What is the present value of this project? What is the net present value of this project? • What is the profitability index of this project? • What is the payback period for this project? What is the discounted payback period? • Is the internal rate of return higher or lower than 9% for this project ? • Should the firm make this investment (assume they have the $30,000 available)? Year After-tax Net Cash Flow 1 $4,000 2 $4,500 3 $7,000 4 $8,000 5 $9,000 6 $7,000 7 $5,000 8 $3,000