Rosewill Inc., is contemplating an electric Food Drying project which is expected to last for 9 years. Using the profitability index rule, what is the lowest annuity cash flow necessary to approve the Food Drying project if it involves an outlay of $95,200 today? Note: Rosewill’s required return is 8.5%. a. $14,361.17 b. $10,577.78 c. $18,386.65 d. $15,557.94 e. $16,972.30
Rosewill Inc., is contemplating an electric Food Drying project which is expected to last for 9 years. Using the profitability index rule, what is the lowest annuity cash flow necessary to approve the Food Drying project if it involves an outlay of $95,200 today? Note: Rosewill’s required return is 8.5%. a. $14,361.17 b. $10,577.78 c. $18,386.65 d. $15,557.94 e. $16,972.30
Chapter11: Capital Budgeting Decisions
Section: Chapter Questions
Problem 2PA: Jasmine Manufacturing is considering a project that will require an initial investment of $52,000...
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Question
Rosewill Inc., is contemplating an electric Food Drying project which is expected to last for 9 years. Using the profitability index rule, what is the lowest
a. $14,361.17
b. $10,577.78
c. $18,386.65
d. $15,557.94
e. $16,972.30
Expert Solution
Step 1
PI = Present value of future cashflow / Initial investment
For approval PI should be atleast 1
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