What is the profitability index for an investment with the following cash flows
ID: 2764699 • Letter: W
Question
What is the profitability index for an investment with the following cash flows given a 9 percent required return? Year Cash Flow 0 $-20,500 1 $7,200 2 $9,400 3 $8,400 A. 1.01 B. 1.02 C. 1.03 D. What is the profitability index for an investment with the following cash flows given a 9 percent required return? Year Cash Flow 0 $-20,500 1 $7,200 2 $9,400 3 $8,400 A. 1.01 B. 1.02 C. 1.03 D. What is the profitability index for an investment with the following cash flows given a 9 percent required return? Year Cash Flow 0 $-20,500 1 $7,200 2 $9,400 3 $8,400
Explanation / Answer
B. 1.02 Statement showing Cash flows Particulars Time PVf@9% Amount PV Cash Outflows - 1.00 (20,500.00) (20,500.00) PV of Cash outflows = PVCO (20,500.00) Cash inflows 1.00 0.9174 7,200.00 6,605.50 Cash inflows 2.00 0.8417 9,400.00 7,911.79 Cash inflows 3.00 0.7722 8,400.00 6,486.34 PV of Cash Inflows =PVCI 21,003.64 PI= PVCI / PVCO 1.02 Time PVF@9% 1.00 0.9174 2.00 0.8417 3.00 0.7722
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