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1. A small family business wants to expand and is planning to start an investment, which...

1. A small family business wants to expand and is planning to start an investment, which will cost an initial investment of $50,000. The father is sure that the investment will generate annual cash flows of  $11,000 for the next 10 years. In exactly 5 years from now, the machine needs some serious maintenance, which will cost $20,000. At the end of the 10 years the investment can be sold for $5,000. The MARR (Minimum Attractive Rate of Return) is 12% annual nominal, compounded semi-annually.

  1. What is the Net Present Value of the investment ?
  2. What is the Profitability Index of the investment ?
  3. Should the company accept this investment or not ?
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