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FinanceQ&A LibrarySuppose your firm is considering investing in a project with the cash flows shown below, that the required rate of return on projects of this risk class is 13 percent, and that the maximum allowable payback and discounted payback statistics for your company are 2.5 and 3.0 years, respectively. Time:012345Cash flow:−$366,000$64,900$83,100$140,100$121,100$80,300Use the PI decision rule to evaluate this project. (Do not round intermediate calculations and round your final answer to 2 decimal places.)PI: _____.__Question

Asked Nov 20, 2019

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Suppose your firm is considering investing in a project with the cash flows shown below, that the required rate of return on projects of this risk class is 13 percent, and that the maximum allowable payback and discounted payback statistics for your company are 2.5 and 3.0 years, respectively.

Time: | 0 | 1 | 2 | 3 | 4 | 5 |

Cash flow: | −$366,000 | $64,900 | $83,100 | $140,100 | $121,100 | $80,300 |

Use the PI decision rule to evaluate this project. **(Do not round intermediate calculations and round your final answer to 2 decimal places.)**

**PI: _____.__**

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Step 1

**Calculation of Profitability Index (PI):**

The profitability index (PI) is **0.92**.

**Excel Spreadsheet:**

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