The company is considering a project that requires an initial investment of $120M to build a new plant, and purchase equipment. The investment will be depreciated on diminishing value basis at 18% per...

The company is considering a project that requires an initial investment of $120M to build a new plant, and purchase equipment. The investment will be depreciated on diminishing value basis at 18% per annum. The new plant will be built on some of the company's land which has a current, after-tax market value of $9.5M. The company will produce units at a cost of $260 each and will sell them for $390 each. There are annual fixed costs of $0.5M. Unit sales are expected to be 270,000 each year for the next 10 years, at which time the project will be abandoned. At that time, the plant and equipment is expected to be worth $24M (before tax) and the land is expected to be worth $13M (after tax). To supplement the production process, the company will need to purchase $5M worth of inventory. That inventory will be depleted during the final year of the project. The required return is 12%. The company's marginal tax rate is 40%.

You are required to calculate the project’s:

(D) ARR (to two decimal places)
(E) PI (Present value index/Profitability index) (to two decimal places)