*Complete the problems in an Excel spreadsheet. Be sure to show your work to receive credit; no hard keys.

Problem 12-2: Profitability Index (PI) and Payback Period

A firm is considering a major expansion that will cost SAR 15,000,000.

Annual cash flows from the project are expected to be SAR 3,975,000 for 7 years.

The firm uses a discount rate of 8%. It accepts the project if the projects payback is less than 5 years.

Calculate the Profitability Index (PI) and the Payback Period of the project and determine if the project is acceptable based on PI and the Payback Period decision criteria.