What is the profitability index for the set of cash flows if the relevant discou

Question

What is the profitability index for the set of cash flows if the relevant discount rate is 9 percent? (Do not round intermediate calculations and round your final answer to 3 decimal places. (e.g., 32.161))

What is the profitability index for the set of cash flows if the relevant discount rate is 14 percent? (Do not round intermediate calculations and round your final answer to 3 decimal places. (e.g., 32.161))

What is the profitability index for the set of cash flows if the relevant discount rate is 21 percent? (Do not round intermediate calculations and round your final answer to 3 decimal places. (e.g., 32.161))

Year Cash Flow 0 -$17,300 1 9,600 2 8,500 3 5,000

Explanation / Answer

PV of Cash Inflows = $ 19823

Profiability Index

= PV of Net Future Cash inflows / Initial Investment Required

= $ 19823 / $17300

= 1.15

Second Part

PV of Cash Inflows = $ $18336

Profiability Index

= PV of Net Future Cash inflows / Initial Investment Required

= $ 18336 / $17300

= 1.06

PV of Cash Inflows = $18336

Profiability Index

= PV of Net Future Cash inflows / Initial Investment Required

= $ 16562 / $17300

= 0.96

year cash flow discount factor @9% PV of Cash Flow 0 -17300 1 -17300 1 9600 0.917431 8807 2 8500 0.84168 7154 3 5000 0.772183 3861

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