A project has an initial cost of $61,050, expected net cash inflows of $8,000 per year...
A project has an initial cost of $61,050, expected net cash inflows of $8,000 per year for 11 years, and a cost of capital of 11%. What is the project's PI? Do not round your intermediate calculations. Round your answer to two decimal places.
Homework Answers
PI = PV of Future Cash Flows / Initial Investment
PV of Future Cash Flows = Annual Cash Inflows * [{1 - (1 + r)-n} / r]
= $8,000 * [{1 - (1 + 0.11)-11} / 0.11]
= $8,000 * [0.6827 / 0.11]
= $8,000 * 6.2065 = $49,652.12
PI = $49,652.12 / $61,050 = 0.81
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