What is the profitability index for the above set of cash flows if the relevant

Question

What is the profitability index for the above set of cash flows if the relevant discount rate is 10 percent?(Do not round intermediate calculations. Round your answer to 3 decimal places (e.g., 32.161).)

What is the profitability index if the discount rate is 15 percent? (Do not round intermediate calculations. Round your answer to 3 decimal places (e.g., 32.161).)

What is the profitability index if the discount rate is 22 percent? (Do not round intermediate calculations. Round your answer to 3 decimal places (e.g., 32.161).)

Explanation / Answer

1)

PV of cash flows from year1 = 14700/1.1 + 14200/1.1^2 + 10600/1.1^3 = 33063.1104433

Profitability index = 33063.1104433/29000 = 1.140

2)

PV of cash flows from year1 = 14700/1.15 + 14200/1.15^2 + 10600/1.15^3 = 30489.520835

Profitability index = 30489.520835/29000 = 1.051

3)

PV of cash flows from year1 = 14700/1.22 + 14200/1.22^2 + 10600/1.22^3 = 27427.1194505

Profitability index = 27427.1194505/29000 = 0.946

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