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

ID: 2773832 • Letter: W

Question

What is the profitability index for the above set of cash flows if the relevant discount rate is 8 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 13 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 20 percent? (Do not round intermediate calculations.Round your answer to 3 decimal places (e.g., 32.161).)

consider the following cash flows:

Explanation / Answer

Statement showing PI Particulars Time PVf@8% Amount PV Cash Outflows                            -                  1.00              (29,900.00)                (29,900.00) PV of Cash outflows                (29,900.00) Cash inflows                     1.00            0.9259                13,800.00                   12,777.78 Cash inflows                     2.00            0.8573                15,100.00                   12,945.82 Cash inflows                     3.00            0.7938                11,500.00                     9,129.07 PV of Cash Inflows                   34,852.66 NPV                     4,952.66 PI = PV of cash flows/Initial Invt PI = 34,852.66/29900 PI = 1.17 Statement showing PI Particulars Time PVf@13% Amount PV Cash Outflows                            -                  1.00              (29,900.00)                (29,900.00) PV of Cash outflows                (29,900.00) Cash inflows                     1.00            0.8850                13,800.00                   12,212.39 Cash inflows                     2.00            0.7831                15,100.00                   11,825.51 Cash inflows                     3.00            0.6931                11,500.00                     7,970.08 PV of Cash Inflows                   32,007.98 NPV                     2,107.98 PI = PV of cash flows/Initial Invt PI = 32,007.98/29900 PI = 1.07 Statement showing PI Particulars Time PVf@20% Amount PV Cash Outflows                            -                  1.00              (29,900.00)                (29,900.00) PV of Cash outflows                (29,900.00) Cash inflows                     1.00            0.8333                13,800.00                   11,500.00 Cash inflows                     2.00            0.6944                15,100.00                   10,486.11 Cash inflows                     3.00            0.5787                11,500.00                     6,655.09 PV of Cash Inflows                   28,641.20 NPV                   (1,258.80) PI = PV of cash flows/Initial Invt PI = 28,641.20/29900 PI = .96

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