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Calculate the profitability index of project

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After discovering a new gold vein in the Colorado mountains, CTC Mining Corporation must decide whether to mine the deposit.

The most cost-effective method of mining gold is sulfuric acid extraction, a process that results in environmental damage. To go ahead with the extraction, CTC Mining Corporation must spend $900,000 for new mining equipment and pay $165,000 for its installation. The gold mine will make the firm an estimated $350,000 each year over the 5-year life of the vein. CTC's cost of capital is 14%.

Assume that the cash inflows occur at the end of the year.

Q) Calculate the Profitability Index of this project.

Reference no: EM132820096

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