A new security system has a price-tag of $7,500, but should save your company $3,375 each year for the next 10 years in reduced thefts. What is the profitability index of the security system? Use a discount rate of 12.4%.
Using TVM Calculation,
Present Value of savings = [FV = 0, PMT = 3,375, N = 10 , I = 0.124]
PV = $18,761.27
PI = 18,761.27/7,500
PI = 2.50
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A new security system has a price-tag of $7,500, but should save your company $3,375 each...