Suppose a potential customer wants to know the project’s profitability index (PI). What is the value of the PI for GP Manufacturing, and what is the rationale behind this measure? (Assume the discount rate is equal to cost of capital: 12%. Tax is 36%). Under what conditions do NPV, IRR, MIRR, and PI all lead to the same accept/reject decision? When can conflicts occur? If a conflict arises, which method should be used, and why? 

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Year 0 1 2 3 4 5 6 0 00 7 8 Net cost $ (302,040.00) Deprn. Tax Saving ssss es eses es $ $ $ $ Table 1 Project Net Cash Flows $ 21,816.00 34,906.00 20,725.00 13,090.00 11,999.00 6,545.00 A.T. Cost Saving $ $ $ $ $ $ $ $ 48,640.00 48,640.00 48,640.00 48,640.00 48,640.00 48,640.00 48,640.00 48,640.00 Net CF $ (302,040.00) $ 70,456.00 $ 83,546.00 $ 69,365.00 $ 61,730.00 $ 60,639.00 $ 55,185.00 $ 48,640.00 $ 58,240.00 Year 0 1 2 3 4 5 6 0 00 7 8 Net cost $ (302,040.00) Deprn. Tax Saving ssss es eses es $ $ $ $ Table 1 Project Net Cash Flows $ 21,816.00 34,906.00 20,725.00 13,090.00 11,999.00 6,545.00 A.T. Cost Saving $ $ $ $ $ $ $ $ 48,640.00 48,640.00 48,640.00 48,640.00 48,640.00 48,640.00 48,640.00 48,640.00 Net CF $ (302,040.00) $ 70,456.00 $ 83,546.00 $ 69,365.00 $ 61,730.00 $ 60,639.00 $ 55,185.00 $ 48,640.00 $ 58,240.00

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ANSWER The profitability index PI is a measure of the attractiveness of a project or investment It i... View the full answer