Can I please get step by step instructions on how to solve this. The answers are
ID: 2717537 • Letter: C
Question
Can I please get step by step instructions on how to solve this. The answers are already there but I don't understand how to solve the problems. Thank You
Question 1
Find the profitability index (PI) for the following series of future cash flows, assuming the company’s cost of capital is 5.87 percent. The initial outlay is $326,344.
Year 1: $164,333
Year 2: $120,555
Year 3: $128,746
Year 4: $169,634
Year 5: $186,506
Round the answer to two decimal places.
Answer:
Gold Mining, Inc. is using the profitability index (PI) when evaluating projects. Gold Mining’s cost of capital is 10.90 percent. What is the PI of a project if the initial costs are $1,729,740 and the project life is estimated as 10 years? The project will produce the same after-tax cash inflows of $480,004 per year at the end of the year.
Round the answer to two decimal places.
Answer:
Good Morning Food, Inc. is using the profitability index (PI) when evaluating projects. You have to find the PI for the company’s project, assuming the company’s cost of capital is 7.31 percent. The initial outlay for the project is $383,081. The project will produce the following end-of-the-year after-tax cash inflows of
Year 1: $158,235
Year 2: $49,576
Year 3: $14,640
Year 4: $437,357
Round the answer to two decimal places.
Answer:
A project has an initial outlay of $3,798. It has a single payoff at the end of year 7 of $9,684. What is the profitability index (PI) of the project, if the company’s cost of capital is 14.18 percent?
Round the answer to two decimal places.
Answer:
Can I please get step by step instructions on how to solve this. The answers are already there but I don't understand how to solve the problems. Thank You
Question 1
0 / 1 pointExplanation / Answer
1)Present value of cash flow = (PVF@5.87% ,1 * CF1) +(PVF@5.87%,2*CF2) + ....(PVF@5.87%,5 *CF5)
= (.94455*164333)+(.89218*120555)+(.84272*128746)+(.79599*169634)(.75186*186506)
= 155220.74+ 107556.76 + 108496.83 + 135026.97+ 140226.40
= 646527.69
PI = Present value /Initial investment
= 646527.69 / 326344
= 1.98
2)Present value = PVAF@10.90%,10 * Annual cash flow
= 5.91401 * 480004
= 2838747.66
PI = 2838747.66 / 1729740
= 1.64
3)Present value of cash flow = (PVF@7.31%,1 *CF1 ) +(PVF@7.31%,2 *CF2) +..(PVF@7.31%,4 *CF4)
= (.93188 * 158235 ) +(.86840*49576)+(.80924*14640)+(.75412*437357)
= 147456.03+ 43051.80 + 11847.27+ 329819.66
= 532174.76
PI = 532174.76 / 383081
= 1.39
4)Present value =(PVF@14.18%,7 *CF 7).
= .39525 * 9684
= 3827.58
PI = 3827.58 / 3798
= 1.01
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.