What is the profitability index for the above set of cash flows if the relevant
ID: 2650610 • Letter: W
Question
What is the profitability index for the above set of cash flows if the relevant discount rate is 9 percent? (Do not round intermediate calculations. Round your answer to 3 decimal places (e.g., 32.161).)
What is the profitability index if the discount rate is 14 percent? (Do not round intermediate calculations.Round your answer to 3 decimal places (e.g., 32.161).)
What is the profitability index if the discount rate is 21 percent? (Do not round intermediate calculations.Round your answer to 3 decimal places (e.g., 32.161).)
Consider the following cash flows:
Explanation / Answer
Requirement 1: What is the profitability index for the above set of cash flows if the relevant discount rate is 9 percent? (Do not round intermediate calculations. Round your answer to 3 decimal places (e.g., 32.161).)
Profitability index = PV of Cash Inflow/PV of Cash Outflow
PV of Cash Inflow = 14400/1.09 + 14500/1.09^2 + 10900/1.09^3
PV of Cash Inflow = $ 33,832.17
PV of Cash Outflow = $ 29300
Profitability index = 33832.17/29300
Profitability index = 1.155
Answer
Profitability index 1.155
Requirement 2:
What is the profitability index if the discount rate is 14 percent? (Do not round intermediate calculations.Round your answer to 3 decimal places (e.g., 32.161).)
Profitability index = PV of Cash Inflow/PV of Cash Outflow
PV of Cash Inflow = 14400/1.14 + 14500/1.14^2 + 10900/1.14^3
PV of Cash Inflow = $ 31146.05
PV of Cash Outflow = $ 29300
Profitability index = 31146.05/29300
Profitability index = 1.063
Answer
Profitability index 1.063
Requirement 3:
What is the profitability index if the discount rate is 21 percent? (Do not round intermediate calculations.Round your answer to 3 decimal places (e.g., 32.161).)
Profitability index = PV of Cash Inflow/PV of Cash Outflow
PV of Cash Inflow = 14400/1.21 + 14500/1.21^2 + 10900/1.21^3
PV of Cash Inflow = $ 27957.29
PV of Cash Outflow = $ 29300
Profitability index = 27957.29/29300
Profitability index = 0.954
Answer
Profitability index 0.954
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.