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Sure-Lock Ltd. is purchasing new equipment at a cost of $325,000. The equipment will yield incremental...
Sure-Lock Ltd. is purchasing new equipment at a cost of $325,000. The equipment will yield incremental cash flows of $100,000 in the first year of its operation. After that, the incremental cash flows will decrease at a rate of 10% per year. The equipment is expected to last for 6 years, and will be worthless at the end of its life. What is the profitability index of the equipment? The required rate of return is 15%.
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