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Consider the following cash flows:    Year Cash Flow 0 $-7,700    1 4,000 2 4,100...

Consider the following cash flows:

  

Year Cash Flow
0 $-7,700   
1 4,000
2 4,100   
3 5,400   
a. What is the profitability index for the cash flows if the relevant discount rate is 9 percent?

b. What is the profitability index for the cash flows if the relevant discount rate is 18 percent?

C. What is the profitability index for the cash flows if the relevant discount rate is 24 percent?

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Answer #1

M E6 foc =SUM(E2:E5) BC year Cash flows pv@9% Present value 0 $ (7,700.00) 1.0000 $ 11 $ 4,000.00 0.9174 $ 2 $ 4,100.00 0.841

E6 fc =SUM(E2:E5) B co year Cash flows pv@9% Present value O -7700 1 =C2*D2 1 4000 =D2/1.09 =C3*D3 |4100 =D3/1.09 =C4*D4 5400

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