What is the profitability index for the set of cash flows if the relevant discou
ID: 2651864 • Letter: W
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 –$ 18,800 1 11,100 2 10,000 3 6,500
Explanation / Answer
Year Cash Flow Discount rate PV of cash flows Discount rate PV of cash flows Discount rate PV of cash flows 0 –$ 18,800 9% 14% 21% A B C= A*B D E=A*D F G= A*F 1 11,100 0.9174 10,183 0.8772 9,737 0.8264 9,173 2 10,000 0.8417 8,417 0.7695 7,695 0.683 6,830 3 6,500 0.7722 5,019 0.675 4,388 0.5645 3,669 Total PV of future cash infows 23,619 21,819 19,672 Profitability Index= PV of cash inflows 1.26 1.16 1.05 PV of cash outflows
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