When do you use Profitability Index (PI) to evaluate projects? How? a. Under capital rationing; by...
When do you use Profitability Index (PI) to evaluate projects? How?
a. Under capital rationing; by ranking projects from the highest PI to the lowest;
b.For complementary projects; by ranking from the highest PI to the lowest;
C.Under capital Rationing; by randomly choosing projects with any PI;
d.For complementary projects; by randomly choosing projects with any PI;
Homework Answers
Option A is correct
Under capital rationing; by ranking projects from the highest PI to the lowest;
Project with highest PI should be accepted.
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When do you use Profitability Index (PI) to evaluate projects?
How?
a. Under capital rationing; by...
6. Evaluate the following projects, using the profitability index. Assume a cost of capital of 11%....
6. Evaluate the following projects, using the profitability index. Assume a cost of capital of 11%. Project Al Project B |Initial Cash Outflow - $260,0001-$250,000 Year 1 Cash flow 23,000 160,000 Year 2 Cash flow 127,000 95,000 Year 3 Cash flow | 190,000175,000 Ja. What is the profitability index for each project? b. If the projects are independent, which would you accept according to the profitability index criterion? c. If these projects are mutually exclusive, which would you accept according...
Good Morning Food, Inc. is using the profitability index (PI) when evaluating projects. You have to...
Good Morning Food, Inc. is using the profitability index (PI) when evaluating projects. You have to find the PI for the company’s project, assuming the company’s cost of capital is 9.86 percent. The initial outlay for the project is $366,126. The project will produce the following end-of-the-year after-tax cash inflows of Year 1: $147,565 Year 2: $46,229 Year 3: $272,209 Year 4: $425,515
Good Morning Food, Inc. is using the profitability index (PI) when evaluating projects. You have to...
Good Morning Food, Inc. is using the profitability index (PI) when evaluating projects. You have to find the PI for the company’s project, assuming the company’s cost of capital is 5.05 percent. The initial outlay for the project is $393,543. The project will produce the following end-of-the-year after-tax cash inflows of Year 1: $146,359 Year 2: $112,569 Year 3: $151,495 Year 4: $143,366 Round the answer to two decimal places.
Gold Mining, Inc. is using the profitability index (PI) when evaluating projects. Gold Mining’s cost of...
Gold Mining, Inc. is using the profitability index (PI) when evaluating projects. Gold Mining’s cost of capital is 5.18 percent. What is the PI of a project if the initial costs are $2,290,428 and the project life is estimated as 10 years? The project will produce the same after-tax cash inflows of $534,517 per year at the end of the year.
Gold Mining, Inc. is using the profitability index (PI) when evaluating projects. Gold Mining’s cost of...
Gold Mining, Inc. is using the profitability index (PI) when evaluating projects. Gold Mining’s cost of capital is 11.35 percent. What is the PI of a project if the initial costs are $2,118,606 and the project life is estimated as 5 years? The project will produce the same after-tax cash inflows of $479,544 per year at the end of the year.
Gold Mining, Inc. is using the profitability index (PI) when evaluating projects. Gold Mining's cost of...
Gold Mining, Inc. is using the profitability index (PI) when evaluating projects. Gold Mining's cost of capital is 13.09%. What is the PI of a project if the initial costs are $2,472,241 and the project life is estimated as 6 years. The project will produce the same after-tax cash inflows of $630,586 per year at the end of the year. Round the answer to two decimal places.
Rank the following mutually exclusive projects based on profitability index (PI). Cost of capital = 6%....
Rank the following mutually exclusive projects based on profitability index (PI). Cost of capital = 6%. Project Initial Investment Cash flow 1 Cash flow 2 A 500 300 250 B 600 450 300 C 450 300 300
Gold Mining, Inc. is using the profitability index (PI) when evaluating projects. Gold Mining’s cost of...
Gold Mining, Inc. is using the profitability index (PI) when evaluating projects. Gold Mining’s cost of capital is 6.53 percent. What is the PI of a project if the initial costs are $1,845,920 and the project life is estimated as 5 years? The project will produce the same after-tax cash inflows of $589,165 per year at the end of the year. Round the answer to two decimal places.
select the right answer. Our firm has a capital rationing problem (more independent normal projects then...
select the right answer.
Our firm has a capital rationing problem (more independent normal projects then money to fund them). Which of the following evaluation approaches can be used to help the firm? Only the net present value (NPV). The modified internal rate of return (MIRR), Pl and NPV can be used. Only the internal rate of return (IRR). Any of the time value of money approaches can be used. O The profitability index (PI) and NPV can be used...
please select the right answer Our firm has a capital rationing problem (more independent normal projects...
please select the right answer
Our firm has a capital rationing problem (more independent normal projects then money to fund them). Which of the following evaluation approaches can be used to help the firm? Only the net present value (NPV). O The modified internal rate of return (MIRR), Pl and NPV can be used. O Only the internal rate of return (IRR). O Any of the time value of money approaches can be used. The profitability index (PI) and NPV...
6. Evaluate the following projects, using the profitability index. Assume a cost of capital of 11%. Project Al Project B |Initial Cash Outflow - $260,0001-$250,000 Year 1 Cash flow 23,000 160,000 Year 2 Cash flow 127,000 95,000 Year 3 Cash flow | 190,000175,000 Ja. What is the profitability index for each project? b. If the projects are independent, which would you accept according to the profitability index criterion? c. If these projects are mutually exclusive, which would you accept according...
select the right answer.
Our firm has a capital rationing problem (more independent normal projects then money to fund them). Which of the following evaluation approaches can be used to help the firm? Only the net present value (NPV). The modified internal rate of return (MIRR), Pl and NPV can be used. Only the internal rate of return (IRR). Any of the time value of money approaches can be used. O The profitability index (PI) and NPV can be used...
please select the right answer
Our firm has a capital rationing problem (more independent normal projects then money to fund them). Which of the following evaluation approaches can be used to help the firm? Only the net present value (NPV). O The modified internal rate of return (MIRR), Pl and NPV can be used. O Only the internal rate of return (IRR). O Any of the time value of money approaches can be used. The profitability index (PI) and NPV...
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