Suppose your firm is considering investing in a project with the cash flows show
ID: 2787457 • Letter: S
Question
Suppose your firm is considering investing in a project with the cash flows shown below, that the required rate of return on projects of this risk class is 11 percent, and that the maximum allowable payback and discounted payback statistics for your company are 3.0 and 3.5 years, respectively.
Use the PI decision rule to evaluate this project. (Do not round intermediate calculations. Round your final answer to 2 decimal places.)
Suppose your firm is considering investing in a project with the cash flows shown below, that the required rate of return on projects of this risk class is 11 percent, and that the maximum allowable payback and discounted payback statistics for your company are 3.0 and 3.5 years, respectively.
Explanation / Answer
Project should be accepted as PI is positive Statement showing Cash flows Particulars Time PVf 11% Amount PV Cash Outflows - 1.00 (237,000.00) (237,000.00) PV of Cash outflows = PVCO (237,000.00) Cash inflows 1.00 0.9009 66,000.00 59,459.46 Cash inflows 2.00 0.8116 84,200.00 68,338.61 Cash inflows 3.00 0.7312 141,200.00 103,244.22 Cash inflows 4.00 0.6587 122,200.00 80,496.93 Cash inflows 5.00 0.5935 81,400.00 48,306.94 PV of Cash Inflows =PVCI 359,846.15 PI= PVCI / PVCO 1.52
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.