Finance Quiz
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CAPITAL BUDGETING
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A mining project requires an initial investment of $2,000,000. It will generate positive cash flows for five years. However, at the end of the sixth year, the company must pay $500,000 in environmental cleanup costs. The present value of the positive operating cash flows (years 1-5) is $2,800,000. The present value of the cleanup cost in year 6 is $250,000. What is the project's profitability index?
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