Consider the following cash flows: Year Cash Flow 0 $-29,300 1 14,400 2 14,500 3

Question

Consider the following cash flows:

  

Year

Cash Flow

0

$-29,300      

1

14,400      

2

14,500      

3

10,900      

  

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

  

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

  

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

Consider the following cash flows:

  

Year

Cash Flow

0

$-29,300      

1

14,400      

2

14,500      

3

10,900      

Explanation / Answer

Initial investment :29300

Present value of cash flow

Profitability Index =Present value of future cash flows /Initial investment

Profitability index :

at the rate of 9% =33832.19/29300 = 1.155

at the rate of 14% =31146.93/29300 = 1.063

at the rate of 21%=27956.71/29300 = .9542

Cash flow( a) Present value @9% b present value(a*b) Present value @14% (C) present value (a*c) present value@21% (D) present value (a*d) 14400 .9174 13210.56 .8772 12631.68 .8264 11900.16 14500 .8417 12204.65 .7695 11157.75 .6830 9903.50 10900 .7722 8416.98 .6750 7357.50 .5645 6153.05 33832.19 31146.93 27956.71

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.