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XYZ Manufacturing is considering investing in new automated machinery for their production line. The project requires an initial investment of $125,000. After careful analysis, the financial team has determined that the project has a profitability index of 1.45. Calculate: a) The present value of future cash inflows from this investment b) The net present value (NPV) of the project c) Based on the profitability index, should XYZ Manufacturing proceed with the investment?

XYZ Manufacturing is considering investing in new automated machinery for their production line. The project requires an initial investment of $125,000. After careful analysis, the financial team has determined that the project has a profitability index of 1.45. Calculate: a) The present value of future cash inflows from this investment b) The net present value (NPV) of the project c) Based on the profitability index, should XYZ Manufacturing proceed with the investment?

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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XYZ Manufacturing is considering investing in new automated machinery for their production line. The project requires an initial investment of $125,000. After careful analysis, the financial team has determined that the project has a profitability index of 1.45. Calculate: a) The present value of future cash inflows from this investment b) The net present value (NPV) of the project c) Based on the profitability index, should XYZ Manufacturing proceed with the investment?
Transcribed Image Text:XYZ Manufacturing is considering investing in new automated machinery for their production line. The project requires an initial investment of $125,000. After careful analysis, the financial team has determined that the project has a profitability index of 1.45. Calculate: a) The present value of future cash inflows from this investment b) The net present value (NPV) of the project c) Based on the profitability index, should XYZ Manufacturing proceed with the investment?
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