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

Question

What is the profitability index for the set of cash flows if the relevant discount rate is 11 percent? (Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161.)

What is the profitability index for the set of cash flows if the relevant discount rate is 16 percent? (Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161.)

What is the profitability index for the set of cash flows if the relevant discount rate is 23 percent? (Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161.)

Explanation / Answer

Statemnet showing Cash flows Particulars Time PVf@11% Amount PV Cash Outflows                                           -                                   1.00      (18,100.00)                (18,100.00) PV of Cash outflows                (18,100.00) Cash inflows                                    1.00                            0.9009         10,400.00                     9,369.37 Cash inflows                                    2.00                            0.8116           9,300.00                     7,548.09 Cash inflows                                    3.00                            0.7312           5,800.00                     4,240.91 PV of Cash Inflows                   21,158.37 NPV                     3,058.37 PI = PV of future cash flows/initial Invt PI = 21,158.37/18100 = 1.17 Statemnet showing Cash flows Particulars Time PVf@16% Amount PV Cash Outflows                                           -                                   1.00      (18,100.00)                (18,100.00) PV of Cash outflows                (18,100.00) Cash inflows                                    1.00                            0.8621         10,400.00                     8,965.52 Cash inflows                                    2.00                            0.7432           9,300.00                     6,911.41 Cash inflows                                    3.00                            0.6407           5,800.00                     3,715.81 PV of Cash Inflows                   19,592.75 NPV                     1,492.75 PI = PV of future cash flows/initial Invt PI = 19592.75/18100 = 1.08 Statemnet showing Cash flows Particulars Time PVf@23% Amount PV Cash Outflows                                           -                                   1.00      (18,100.00)                (18,100.00) PV of Cash outflows                (18,100.00) Cash inflows                                    1.00                            0.8130         10,400.00                     8,455.28 Cash inflows                                    2.00                            0.6610           9,300.00                     6,147.13 Cash inflows                                    3.00                            0.5374           5,800.00                     3,116.83 PV of Cash Inflows                   17,719.25 NPV                      (380.75) PI = PV of future cash flows/initial Invt PI = 17,719.25/18100 = .98

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