Question

Compute the PI statistic for Project Q if the appropriate cost of capital is 13 percent....

Compute the PI statistic for Project Q if the appropriate cost of capital is 13 percent. (Do not round intermediate calculations and round your final answer to 2 decimal places.)

Project Q
Time: 0 1 2 3 4
Cash flow: –$12,700 $4,200 $5,030 $4,920 $3,000
0 0
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Answer #1

PI = Present value / initial investment

Present value = 4200 / (1 + 0.13)1 + 5,030 / (1 + 0.13)2 + 4,920 / (1 + 0.13)3 + 3,000 / (1 + 0.13)4

Present value = $3,716.814159 + 3,939.227817 + 3,409.806798 + 1,839.956183

Present value = $12,905.80496

PI = 12,905.80496 / 12,700

PI = 1.02

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