Consider a capital project whose initial cost, which is also capital cost, is $20 million. The projects anticipated economic life is 6 years. At the end of each of these six years, the project is expected to produce incremental revenue of $10 million and 40% of the incremental revenue will be the incremental operating costs, other than the capital cost allowance CCA. The CCA will be claimed on a declining balance basis at the d rate of 30%. The first- year one-half rule will apply. The corporate tax rate of the firm is 30%. The salvage value of the equipment at the end of year 6 is $6.0 million. The projects cost of capital is 12% per annum. Finally, the project will require incremental net working capital of $1.5 million now, $1.0 million at the end of the first year, and $0.5 million at the end of the second year, and thereafter incremental net working capital requirements will be zero.

Calculate the NPV of this project. Also, calculate the profitability index of the projec