Consider the following cash flows: What is the profitability index for the above
ID: 2757565 • Letter: C
Question
Consider the following cash flows:
What is the profitability index for the above set of cash flows if the relevant discount rate is 11 percent? (Do not round intermediate calculations. Round your answer to 3 decimal places (e.g., 32.161).)
What is the profitability index if the discount rate is 16 percent? (Do not round intermediate calculations. Round your answer to 3 decimal places (e.g., 32.161).)
What is the profitability index if the discount rate is 23 percent? (Do not round intermediate calculations. Round your answer to 3 decimal places (e.g., 32.161).)
Year Cash Flow 0 $-29,100 1 14,600 2 14,300 3 10,700
Explanation / Answer
Statement showing Cash flows Particulars Time PVf@11% Amount PV Cash Outflows - 1.00 (29,100.00) (29,100.00) PV of Cash outflows (29,100.00) Cash inflows 1.00 0.9009 14,600.00 13,153.15 Cash inflows 2.00 0.8116 14,300.00 11,606.20 Cash inflows 3.00 0.7312 10,700.00 7,823.75 PV of Cash Inflows 32,583.10 PI = PVCI/PVCO 1.120 Statement showing Cash flows Particulars Time PVf@16% Amount PV Cash Outflows - 1.00 (29,100.00) (29,100.00) PV of Cash outflows (29,100.00) Cash inflows 1.00 0.8621 14,600.00 12,586.21 Cash inflows 2.00 0.7432 14,300.00 10,627.23 Cash inflows 3.00 0.6407 10,700.00 6,855.04 PV of Cash Inflows 30,068.47 PI = PVCI/PVCO 1.033 Statement showing Cash flows Particulars Time PVf@23% Amount PV Cash Outflows - 1.00 (29,100.00) (29,100.00) PV of Cash outflows (29,100.00) Cash inflows 1.00 0.8130 14,600.00 11,869.92 Cash inflows 2.00 0.6610 14,300.00 9,452.05 Cash inflows 3.00 0.5374 10,700.00 5,750.01 PV of Cash Inflows 27,071.97 PI = PVCI/PVCO 0.930
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