Find the profitability index (Pl) for the following series of future cash flows, assuming the company's...

Question

Question

Find the profitability index (Pl) for the following series of future cash flows, assuming the companys cost of capital is 7.

Answer 1

Answer #1

Profitability Index = Present Value of Future Cash Flows / Initial Investment

Profitability Index = ($133,994/1.0747 + $196,473/1.0747² + $193,655/1.0747³ + $162,498/1.0747⁴ + $123,018/1.0747⁵) / $386,820

Profitability Index = 1.70

Answer 2

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