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QUESTION 1 Suppose a company has proposed a new 4 year project. The project has an iniial outlay of $23,000 and has expected cash flows of $6,000 in year 1, $9,000 in year 2.$11,000 in year 3, and $13,000 in ar4The eared rate of return is 17% for pro ects at this company what is the p oftablity index for his project? Answer to the nearest hundredth, eg 120) Clhek Save and Submit to save and submit, Click Save All Ansuers to save all answers 1S
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Answer #1

Profitability Index

= PV of cash inflows / Initial outlay

= [\tiny \sum Cash inflow in year n / (1 + Required return)n] / Initial Outlay

= [(6,000 / 1.17) + (9,000 / 1.172) + (11,000 / 1.173) + (13,000 / 1.174)] / 23,000

= 25,508.3538 / 23,000

= 1.1091 \approx 1.11

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