Question: A firm is considering a project that is expected to generate a cash flow of $15 million in 1 year. Starting in year 2,

A firm is considering a project that is expected to generate a

A firm is considering a project that is expected to generate a cash flow of $15 million in 1 year. Starting in year 2, the annual cash flows generated by the firm are expected to grow at a rate of 3% per year, each year, forever. The initial cost of the project is $225 million. The discount rate applicable to this project is 9.5% per year compounded annually. What is the profitability index for this project and should the project be accepted?

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