Samsung Electronics is considering a project with an initial investment of $800,000 The asset will be depreciated over five years at 20 per year The projected cash flows are Year Inflow ($) Outflow ($) Year 1 240,000 100,000 Year 2 250,000 105,000 Year 3 260,000 110,000 Year 4 270,000 115,000 Year 5 280,000 120,000 a What is the payback period b Calculate the profitability index (PI) c Assuming a cost of capital of 9 , what is the net present value (NPV) of the cash flows d Should Samsung Electronics proceed with the project

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Question: Samsung Electronics is considering a project with an initial investment of $800,000. The asset will be depreciated over five years at 20% per year. The

Samsung Electronics is considering a project with an initial investment of $800,000. The asset will be depreciated over five years at 20% per year. The projected cash flows are:

Year	Inflow ($)	Outflow ($)
Year 1	240,000	100,000
Year 2	250,000	105,000
Year 3	260,000	110,000
Year 4	270,000	115,000
Year 5	280,000	120,000

a. What is the payback period?
b. Calculate the profitability index (PI).
c. Assuming a cost of capital of 9%, what is the net present value (NPV) of the cash flows?
d. Should Samsung Electronics proceed with the project?

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