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Calculate the payback period and profitability index

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Problem 1: Based on the following after-tax cash flows, calculate the payback period, net present value and profitability index.

After-tax cash flows

RM

Initial outlay 200,000

Annual differential cash flows 90,000

Terminal cash flows 33,000

Assume that a new machine will have a 7 years useful life and the company requires a minimum return of 12%.

i. Payback period

ii. Net present value

iii. Profitability index

Reference no: EM132745449

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