Hermann Corporation is considering an investment of $375 million with expected after-tax cash inflows of $115 million

Question:

Hermann Corporation is considering an investment of $375 million with expected after-tax cash inflows of $115 million per year for seven years and an additional after-tax salvage value of $50 million in Year 7. The required rate of return is 10 percent. What is the investment’s PI?

a. 1.19

b. 1.33

c. 1.56

d. 1.75

Salvage Value
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