Consider the following cash flows YearCash Flow $29,200 14,500 14,400 10,800 2 3

Question

Consider the following cash flows YearCash Flow $29,200 14,500 14,400 10,800 2 3 What is the profitability index for the cash flows if the relevant discount rate is 12 percent? (Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161.) Profitability index What is the profitability index if the discount rate is 17 percent? (Do not round intermediate calculations and round your answer to 3 decimal places, e.g 32.161.) Profitability index What is the profitability index if the discount rate is 24 percent? (Do not round intermediate calculations and round your answer to 3 decimal places, e.g 32.161.) Profitability index

Explanation / Answer

Statement showing Cash flows Particulars Time PVf 12% Amount PV Cash Outflows                    -                   1.00         (29,200.00)                  (29,200.00) PV of Cash outflows = PVCO                  (29,200.00) Cash inflows               1.00            0.8929            14,500.00                     12,946.43 Cash inflows               2.00            0.7972            14,400.00                     11,479.59 Cash inflows               3.00            0.7118            10,800.00                       7,687.23 PV of Cash Inflows =PVCI                     32,113.25 PI = PVCI/PVCO                               1.10 Statement showing Cash flows Particulars Time PVf 17% Amount PV Cash Outflows                    -                   1.00         (29,200.00)                  (29,200.00) PV of Cash outflows = PVCO                  (29,200.00) Cash inflows               1.00            0.8547            14,500.00                     12,393.16 Cash inflows               2.00            0.7305            14,400.00                     10,519.40 Cash inflows               3.00            0.6244            10,800.00                       6,743.20 PV of Cash Inflows =PVCI                     29,655.76 PI = PVCI/PVCO                               1.02 Statement showing Cash flows Particulars Time PVf 24% Amount PV Cash Outflows                    -                   1.00         (29,200.00)                  (29,200.00) PV of Cash outflows = PVCO                  (29,200.00) Cash inflows               1.00            0.8065            14,500.00                     11,693.55 Cash inflows               2.00            0.6504            14,400.00                       9,365.24 Cash inflows               3.00            0.5245            10,800.00                       5,664.46 PV of Cash Inflows =PVCI                     26,723.26 PI = PVCI/PVCO                               0.92

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