Eenhana Local Government in an effort to boost its revenue base decided to acquire a tractor that will be hired out to farmers at affordable charges. The tractor will cost N$ 300,000 and will generate an annual net cash inflow of N$140,000 for six years. The cost of borrowing to procure the tractor is 10%.?

Required:?

Using the Profitability Index Technique of Investment Appraisal and Net Present Value (NPV), advise the chairman of Eenhana Local Government whether to invest in the project or not.?

Discount Factors to be used are:?

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Year 1 2 3 4 5 6 Discount Factor 0.9091 0.8264 0.7513 0.6830 0.6209 0.5645 Year 1 2 3 4 5 6 Discount Factor 0.9091 0.8264 0.7513 0.6830 0.6209 0.5645

Answer rating: 100% (QA)

To determine whether the investment in the tractor project is feasible we will calculate the Profitability Index PI and Net Present Value NPV using th... View the full answer