An investor injects $ 40,000 in a new project. After investing an additional funds of $2000 in the first year, he receives a net benefit of $15000. In the second year the investment is $3000 and the net benefit amounts to $20,000. Following third and fourth year investments and benefits were 4,000 for a benefit of 19000 and 1,000 for a benefit of 16,000. Given that the discount rate is 12%, determine the profitability index.
An investor injects $ 40,000 in a new project. After investing an additional funds of $2000 in the first year, he receives a net benefit of $15000. In the second year the investment is $3000 and the net benefit amounts to $20,000. Following third and fourth year investments and benefits were 4,000 for a benefit of 19000 and 1,000 for a benefit of 16,000. Given that the discount rate is 12%, determine the profitability index.
Chapter11: Capital Budgeting Decisions
Section: Chapter Questions
Problem 6PB: There are two projects under consideration by the Rainbow factory. Each of the projects will require...
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An investor injects $ 40,000 in a new project. After investing an additional funds of $2000 in the first year, he
receives a net benefit of $15000. In the second year the investment is $3000 and the net benefit amounts to
$20,000. Following third and fourth year investments and benefits were 4,000 for a benefit of 19000 and 1,000 for
a benefit of 16,000. Given that the discount rate is 12%, determine the profitability index.
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