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

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Question

Year

What is the profitability index for the set of cash flows if the relevant discount rate is 10 percent?

What is the profitability index for the set of cash flows if the relevant discount rate is 15 percent?

What is the profitability index for the set of cash flows if the relevant discount rate is 22 percent?

Year

Cash Flow 0 –$ 17,800 1 10,100 2 9,000 3 5,500

What is the profitability index for the set of cash flows if the relevant discount rate is 10 percent?

What is the profitability index for the set of cash flows if the relevant discount rate is 15 percent?

What is the profitability index for the set of cash flows if the relevant discount rate is 22 percent?

What is the profitability index for the set of cash flows if the relevant discount rate is 10 percent?

Present Value of Cash Inflow = 10100/1.1 + 9000/1.1^2 + 5500/1.1^3

Present Value of Cash Inflow = 20752.07

Profitability index = Present Value of Cash Inflow/Initial Investment

Profitability index = 20752.07/17800

Profitability index = 1.166

What is the profitability index for the set of cash flows if the relevant discount rate is 15 percent?

Present Value of Cash Inflow = 10100/1.15 + 9000/1.15^2 + 5500/1.15^3

Present Value of Cash Inflow = 19204.24

Profitability index = Present Value of Cash Inflow/Initial Investment

Profitability index = 19204.24/17800

Profitability index = 1.079

What is the profitability index for the set of cash flows if the relevant discount rate is 22 percent?

Present Value of Cash Inflow = 10100/1.22 + 9000/1.22^2 + 5500/1.22^3

Present Value of Cash Inflow = 17354.34

Profitability index = Present Value of Cash Inflow/Initial Investment

Profitability index = 17354.34/17800

Profitability index = 0.975

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