10a. If the initial outflow for a new project was $400,000 and the NPV was calcu

Question

10a. If the initial outflow for a new project was $400,000 and the NPV was calculated to be $40,000, what is the profitability index value? ______________________

Would this project be a worthwhile endeavor? Why or why not?

_________________________________________________________________________________

10b. If the initial outflow for a new project was $400,000 and the NPV was calculated to be ($40,000), what is the profitability index value? ______________________

Would this project be a worthwhile endeavor? Why or why not?

_________________________________________________________________________________

Explanation / Answer

Dear Student Thank you for using Chegg Please find below the answer Statementshowing Computations Paticulars Amount 10-a Initial outflow                    400,000.00 NPV                      40,000.00 Present value of cash inflow =400,000+ 40,000                    440,000.00 profitability index value = 440,000/400,000                                 1.10 Yes project should be accepted as Profitability index is greater than 1 10-b Initial outflow                    400,000.00 NPV                    (40,000.00) Present value of cash inflow =400,000+ 40,000                    360,000.00 profitability index value = 360,000/400,000                                 0.90 Project should be rejected as Profitability index is less than 1

Related Questions

Navigate

• Browse (All)
• Browse 1
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.