What is the profitability index of a project that has an initial cash outflow of $600,...

Question

Question

business finance

Answer 1

✔ Recommended Answer

Answer #1

Present value of inflows=cash inflow*Present value of discounting factor(rate%,time period)

=250/1.1+250/1.1^2+250/1.1^3

=$621.71

PI=Present value of inflows/Present value of outflows

=$621.71/$600

=1.036(Approx)(C)

Answer 2

Similar Homework Help Questions

What is the profitability index for a project that has an initial cost of $7,700 and...

What is the profitability index for a project that has an initial cost of $7,700 and cash inflows of $850, $400, $3,300, and $7,100 over the next four years, respectively, if the required rate of return is 15%. 1.055 0.894 1.944 0.944 0.055
eBook Profitability Index A project has an initial cost of $52,675, expected net cash inflows of...

eBook Profitability Index A project has an initial cost of $52,675, expected net cash inflows of $12,000 per year for 10 years, and a cost of capital of 11%. What is the project's PI (int: Begin by constructing a time line.) Do not round intermediate calculations. Round your answer to two decimal places
Profitability Index A project has an initial cost of $44,600, expected net cash inflows of $14,000...

Profitability Index A project has an initial cost of $44,600, expected net cash inflows of $14,000 per year for 12 years, and a cost of capital of 14%. What is the project's PI? Do not round your intermediate calculations. Round your answer to two decimal places.

Problem 10-04 Profitability Index A project has an initial cost of $62,950, expected net cash inflows...

Problem 10-04 Profitability Index A project has an initial cost of $62,950, expected net cash inflows of $9,000 per year for 8 years, and a cost of capital of 14%. What is the project's PI? Do not round your intermediate calculations. Round your answer to two decimal places
Problem 10-04 Profitability Index A project has an initial cost of $48,475, expected net cash inflows...

Problem 10-04 Profitability Index A project has an initial cost of $48,475, expected net cash inflows of $11,000 per year for 8 years, and a cost of capital of 9%. What is the project's PI? Do not round your intermediate calculations. Round your answer to two decimal places.
1. A proposed project has an initial cost of $69,500 and is expected to produce cash...

1. A proposed project has an initial cost of $69,500 and is expected to produce cash inflows of $32,200, $50,500, and $43,000 over the next 3 years, respectively. What is the net present value of this project at a discount rate of 15.8 percent? $23,657.30 $21,763.60 $24,050.28 $24,933.59 2. A project has an initial cost of $19,000 and cash inflows of $4,200, $4,600, $11,600, and $5,750 over the next 4 years, respectively. What is the payback period? 4.22 years 2.88...

What is the profitability index of a normal project that has an initial cost of $3,284,390...

What is the profitability index of a normal project that has an initial cost of $3,284,390 (i.e., CF0 = - 3283390) and an NPV of $1,935,830? Assume that this project has an expected rate of return (i.e., the project’s cost of capital) of 16.0% and an IRR of 23.2%.
Project LMK requires an initial outlay of $400,000 and has a profitability index of 1.5. The...

Project LMK requires an initial outlay of $400,000 and has a profitability index of 1.5. The project is expected to generate equal annual cash flows over the next twelve years. The required return for this project is 20%. What is project LMK's net present value? A. $600,000 B. $80,000 C. $120,000 D. $150,000 i found the same solution but the different answers so please can you check it for me
Using NPV, should you invest in a project where the initial cash outflow is $28,700 and...

Using NPV, should you invest in a project where the initial cash outflow is $28,700 and the cash inflow in the first year is $2,200 and "grows" at a rate of 2.4 percent thereafter? Assume cost of capital is 10.4 percent. (Round answer to 0 decimal places, e.g. 5,125.) NPV of the project $ Should you invest in the project? YesNo

Project A has an initial cash outflow of $250,000 and is expected to generate $100 thousand...

Project A has an initial cash outflow of $250,000 and is expected to generate $100 thousand a year for the next three years. Project B has an initial cash outflow of $300 thousand and is expected to generate $125 thousand a year for the next three years. Assume the discount rate is 8%. Calculate the NPV and IRR for each project