Year Cash Flow 0 -18,600 1 10,900 2 9,800 3 6,300 What is the profitability inde
ID: 2632507 • Letter: Y
Question
Year Cash Flow
0 -18,600
1 10,900
2 9,800
3 6,300
What is the profitability index for the set of cash flows if the relevant discount rate is 10 percent?
What is the profitability index for the set of cash flows if the relevant discount rate is 15 percent?
What is the profitability index for the set of cash flows if the relevant discount rate is 22 percent?
What is the profitability index for the set of cash flows if the relevant discount rate is 10 percent?
What is the profitability index for the set of cash flows if the relevant discount rate is 15 percent?
What is the profitability index for the set of cash flows if the relevant discount rate is 22 percent?
Explanation / Answer
a)
PV of cash flows = 10900/1.1 + 9800/1.1^2 +6300/1.1^3
=22741.5477085
Profitability index = 22741.5477085/18600 = 1.22
b)
PV of cash flows = 10900/1.15 + 9800/1.15^2 +6300/1.15^3
=21030.8210734
Profitability index = 21030.8210734/18600 = 1.13
c)
PV of cash flows = 10900/1.22 + 9800/1.22^2 +6300/1.22^3
=18988.1311652
Profitability index = 18988.1311652/18600 = 1.02
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.