Question
Asked Nov 20, 2019
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Compute the PI statistic for Project Q if the appropriate cost of capital is 12 percent. (Do not round intermediate calculations and round your final answer to 2 decimal places.)
 

Project Q          
Time: 0 1 2 3 4
Cash flow: −$11,900 $3,800 $4,630 $1,970 $2,600

PI: _____.__

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Step 1

Calculation of Profitability Index (PI):

The profitability index (PI) is 0.85.

Excel Spreadsheet:

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А В с Year Cash Flows FVIF@ 12%|PV of Cash Flows $3,800 $4,630 1 2 1 1.1200 $3,392.86 $3,691.01 $1,402.21 3 2 1.2544 4 $1,970 $2,600 Total PV of Cash Flows 1.4049 5 15735 $1,652.35 $10,138.42 6 7 Initial Investment $11,900 Profitablity Index 0.85

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Finance

Capital Budgeting

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