Year Cash Flow 0 ?$10,000 1 3,900 2 6,000 3 2,500 Required : (a) What is the pro

Question

Year Cash Flow 0 ?$10,000           1 3,900           2 6,000           3 2,500             
Required : (a) What is the profitability index for the cashflows if the relevant discount rate is 8 percent? (Click to select)$1.128$1.042$1.02$1.106$1.074    (b) What is the profitability index for the cashflows if the relevant discount rate is 15 percent? (Click to select)$0.909$1.005$0.928$0.957$0.986    (c) What is the profitability index for the cashflows if the relevant discount rate is 21 percent? (Click to select)0.9170.8990.8730.830.847
rev: 09_18_2012

Year Cash Flow 0 ?$10,000           1 3,900           2 6,000           3 2,500             
Required : (a) What is the profitability index for the cashflows if the relevant discount rate is 8 percent? (Click to select)$1.128$1.042$1.02$1.106$1.074    (b) What is the profitability index for the cashflows if the relevant discount rate is 15 percent? (Click to select)$0.909$1.005$0.928$0.957$0.986    (c) What is the profitability index for the cashflows if the relevant discount rate is 21 percent? (Click to select)0.9170.8990.8730.830.847
rev: 09_18_2012

Year Cash Flow 0 ?$10,000           1 3,900           2 6,000           3 2,500             
Required : (a) What is the profitability index for the cashflows if the relevant discount rate is 8 percent? (Click to select)$1.128$1.042$1.02$1.106$1.074    (b) What is the profitability index for the cashflows if the relevant discount rate is 15 percent? (Click to select)$0.909$1.005$0.928$0.957$0.986    (c) What is the profitability index for the cashflows if the relevant discount rate is 21 percent? (Click to select)0.9170.8990.8730.830.847
rev: 09_18_2012

Year Cash Flow 0 ?$10,000           1 3,900           2 6,000           3 2,500             
Required : (a) What is the profitability index for the cashflows if the relevant discount rate is 8 percent? (Click to select)$1.128$1.042$1.02$1.106$1.074    (b) What is the profitability index for the cashflows if the relevant discount rate is 15 percent? (Click to select)$0.909$1.005$0.928$0.957$0.986    (c) What is the profitability index for the cashflows if the relevant discount rate is 21 percent? (Click to select)0.9170.8990.8730.830.847
rev: 09_18_2012
Year Cash Flow 0 ?$10,000           1 3,900           2 6,000           3 2,500             
Required : (a) What is the profitability index for the cashflows if the relevant discount rate is 8 percent? (Click to select)$1.128$1.042$1.02$1.106$1.074    (b) What is the profitability index for the cashflows if the relevant discount rate is 15 percent? (Click to select)$0.909$1.005$0.928$0.957$0.986    (c) What is the profitability index for the cashflows if the relevant discount rate is 21 percent? (Click to select)0.9170.8990.8730.830.847
rev: 09_18_2012
Year Cash Flow 0 ?$10,000           1 3,900           2 6,000           3 2,500             
Required : (a) What is the profitability index for the cashflows if the relevant discount rate is 8 percent? (Click to select)$1.128$1.042$1.02$1.106$1.074    (b) What is the profitability index for the cashflows if the relevant discount rate is 15 percent? (Click to select)$0.909$1.005$0.928$0.957$0.986    (c) What is the profitability index for the cashflows if the relevant discount rate is 21 percent? (Click to select)0.9170.8990.8730.830.847
rev: 09_18_2012 Year Cash Flow 0 ?$10,000           1 3,900           2 6,000           3 2,500             
Required : (a) What is the profitability index for the cashflows if the relevant discount rate is 8 percent? (Click to select)$1.128$1.042$1.02$1.106$1.074    (b) What is the profitability index for the cashflows if the relevant discount rate is 15 percent? (Click to select)$0.909$1.005$0.928$0.957$0.986    (c) What is the profitability index for the cashflows if the relevant discount rate is 21 percent? (Click to select)0.9170.8990.8730.830.847
rev: 09_18_2012 Year Cash Flow 0 ?$10,000           1 3,900           2 6,000           3 2,500             
Required : (a) What is the profitability index for the cashflows if the relevant discount rate is 8 percent? (Click to select)$1.128$1.042$1.02$1.106$1.074    (b) What is the profitability index for the cashflows if the relevant discount rate is 15 percent? (Click to select)$0.909$1.005$0.928$0.957$0.986    (c) What is the profitability index for the cashflows if the relevant discount rate is 21 percent? (Click to select)0.9170.8990.8730.830.847
rev: 09_18_2012
Year Cash Flow 0 ?$10,000           1 3,900           2 6,000           3 2,500          

Explanation / Answer

a)net present value of cash flow = 3900/1.08 +6000/1.08^2 +2500/1.08^3 = 10739.72

prof. index = 10739.7/10000 = 1.074

b)present value of cash flow = 3900/1.15 +6000/1.15^2 +2500/1.15^3 = 9572

prof. index = 9572/10000 = 0.9572

c)present value of cash flow = 3900/1.21+6000/1.21^2 +2500/1.21^3 = 8730

prof. index = 8730/10000 = 0.8730

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