Question

Asked Nov 24, 2019

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Find the net present value (NPV) and proﬁtability index (PI) of a project that costs $1,500 and returns $800 in year one and $850 in year two. Assume the project’s cost of capital is 8 percent.

Step 1

The net present value for the project is calculated below:

Step 2

The formula to calculate profitability index is given below:

Step 3

Substitute ($740.74 + $728.74) =$1,469.48 for present value...

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