Consider the following cash flows: What is the profitability index for the above
ID: 2757617 • 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 9 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 14 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 21 percent? (Do not round intermediate calculations. Round your answer to 3 decimal places (e.g., 32.161).)
Year Cash Flow 0 $-29,800 1 13,900 2 15,000 3 11,400
Explanation / Answer
Statement showing Cash flows Particulars Time PVf@9% Amount PV Cash Outflows - 1.00 (29,800.00) (29,800.00) PV of Cash outflows (29,800.00) Cash inflows 1.00 0.9174 13,900.00 12,752.29 Cash inflows 2.00 0.8417 15,000.00 12,625.20 Cash inflows 3.00 0.7722 11,400.00 8,802.89 PV of Cash Inflows 34,180.39 PI = PVCI/PVCO 1.147 Statement showing Cash flows Particulars Time PVf@14% Amount PV Cash Outflows - 1.00 (29,800.00) (29,800.00) PV of Cash outflows (29,800.00) Cash inflows 1.00 0.8772 13,900.00 12,192.98 Cash inflows 2.00 0.7695 15,000.00 11,542.01 Cash inflows 3.00 0.6750 11,400.00 7,694.68 PV of Cash Inflows 31,429.67 PI = PVCI/PVCO 1.055 Statement showing Cash flows Particulars Time PVf@21% Amount PV Cash Outflows - 1.00 (29,800.00) (29,800.00) PV of Cash outflows (29,800.00) Cash inflows 1.00 0.8264 13,900.00 11,487.60 Cash inflows 2.00 0.6830 15,000.00 10,245.20 Cash inflows 3.00 0.5645 11,400.00 6,435.00 PV of Cash Inflows 28,167.81 PI = PVCI/PVCO 0.945
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