Business Finance homework help...?

The edwards are considering a $200,000 expansion for their existing retail outlet. That expansion would generate $35,000 in cash every year over the next 10 years. Cost of capital is 8%. Calculate the net present value, internal rate of return, and profibility index. Please help, i don't understand this at all.

Net present value is found by taking the original investment cost, $200,000 (that would be a negative amount since it's cash out the door), and then adding the present value of the annual cash inflows expected ($35,000 for 10 years at required rate of return, which is the cost of capital number of 8%). You look up in the present value annuity table the factor for 10 years at 8%, which is 6.710, and multiply by 35,000 to get present value of expected cash inflows = $234,850.
Net present value = $234,850 - $200,000 = $34,850.
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Factor of the Internal Rate of Return =

Investment required / Net annual cash inflows =

$200,000 / $35,000 = 5.714

Now you look again at the annuity table on the ten year line and find the closest percentage rate that matches this number, which is 12%. That's your internal rate of return.
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Profitabilty index = Net present value / Investment required =
$34,850 / $200,000 = 0.17

Profitability index is usually used when comparing two or more different proposed projects. The higher the project profitability index, the more desirable the project.