Answered: Consider cash flows Year 0: -6900 Y1:…

Consider cash flows Year 0: -6900 Y1: 1700 Y2: 2900 Y3: 2900 Y4: 3500 What is the profitability index for this project if the return is 10%

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter12: Capital Budgeting: Decision Criteria

Section: Chapter Questions

Problem 1P: A project has an initial cost of 40,000, expected net cash inflows of 9,000 per year for 7 years,...

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Question

Consider cash flows

Year 0: -6900

Y1: 1700

Y2: 2900

Y3: 2900

Y4: 3500

What is the profitability index for this project if the return is 10%

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Step 2: Calculation of present value.

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Step 3: Profitability Index calculation:

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