Homework Answers
Answer-
The profitability index rule can be defined as a variety of the
Net present value rule.
Relation between the two-
Usually,if there is a positive net present value it does
corresponds to a profitability index whose value is more than one.
A negative form of npv usually corresponds with a profit index
which is below one.
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NPV and the Profitability Index If we define the NPV index as the ratio of NPV...
1.) Why might the profitability index be preferable over the NPV method when analyzing capital investments?...
1.) Why might the profitability index be preferable over the NPV method when analyzing capital investments? 2.) "All costs (past, present, future, variable and fixed) are relevant when making a decision between two alternatives”. Is this true or false? Why or why not? 3.) The current ratio assesses a business’s a. Liquidity b. Profitability c. Market performance d. None of the above 4.) Which of the following is an example of a cost that is variable with respect to the...
Un "Profitability Index" de .85 significa que el a. NPV es mayor a 0. b. NPV...
Un "Profitability Index" de .85 significa que el a. NPV es mayor a 0. b. NPV es menor de 0. c. NPV = 0. d. I.R.R. = Costo de Capital.
11) Which of the following statements is FALSE? A) The profitability index measures the value created...
11) Which of the following statements is FALSE? A) The profitability index measures the value created in terms of NPV per unit of resource consumed. B) The profitability index is the ratio of value created to resources consumed. C) The profitability index can can be easily adapted for determining the correct investment decisions when multiple resource constraints exist. D) The profitability index measures the "bang for your buck."
EXCEL SOLUTION NEEDED PLEASE: EXCEL FORMULA The profitability index is the present value of the future...
EXCEL SOLUTION NEEDED PLEASE: EXCEL FORMULA The profitability index is the present value of the future cash flows divided by the initial investment. If you remember, the NPV function really only calculates the present value of future cash flows, so we will use the NPV function divided by the initial investment to calculate the profitability index as follows: Suppose we have a project with the following cash flows and required return. What is the profitability index of the project? t...
Profitability index and NPV
The two projects below are possible investments. You require a return of 12%.YearProject AProject B0-$31,000-$60,000114,00024,000212,40023,000314,80022,000410,40021,000Find the probability index and NPV of Project A and Project B
1)Compute the Payback, NPV, IRR, and Profitability Index for the following investments. Assume that the cost...
1)Compute the Payback, NPV, IRR, and Profitability Index for the following investments. Assume that the cost of capital for each project is 15%. Project A. Estimated cash flow is 9,962.60 per year for 10 years. Cost $50,000 Project B. Estimated cash flow is $19,677.15 per year for 7 years. Cost $75,000 2) Determine the effective annualized costs of foregoing the trade credit discount on the following terms; A.3/10 net 40 B. 2/20 net 40 C. 4/20 net 60
1 More Info Requirement 1. Compute the payback, the ARR, the NPV, and the profitability index...
1 More Info Requirement 1. Compute the payback, the ARR, the NPV, and the profitability index of these two plans Calculate the payback for both plans. (Round your answers to one decimal place, XX) Amount invested Expected not cash flow Plan 5450000 1525000 Plan B 8150000 11100000 . The company is considering the possible o n Pan would ghtmarshops at a cost of $8.450 000 E u o 51525.000 for 10 year with ori e nd of years. Under Pan...
A project has a profitability index (PI) of 1.1. If the initial investment of $10,000. What do you know about the NPV and IRR? a) NPV may be smaller than zero b)NPV must be $1000 c) The IRR is the pre...
A project has a profitability index (PI) of 1.1. If the initial investment of $10,000. What do you know about the NPV and IRR? a) NPV may be smaller than zero b)NPV must be $1000 c) The IRR is the prevailing discount D) none of the above
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%.
of a project's future cash . .. A project's profitability index is equal to il :...
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1 More Info Requirement 1. Compute the payback, the ARR, the NPV, and the profitability index of these two plans Calculate the payback for both plans. (Round your answers to one decimal place, XX) Amount invested Expected not cash flow Plan 5450000 1525000 Plan B 8150000 11100000 . The company is considering the possible o n Pan would ghtmarshops at a cost of $8.450 000 E u o 51525.000 for 10 year with ori e nd of years. Under Pan...
of a project's future cash . .. A project's profitability index is equal to il : ratio of the _ nows to the project's !! sh line ... Thi nel present value; initial cash outlay present value; depreciable basis net present value; depreciable basis (c! None of the above Twa mutually exclusive investment proposals have "scale differences" (i.e., the cost of the projects differ). Ranking these projects on the basis of IRR, NPV, and Pl methods give contradictory results. (a)...
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