Company XYZ is considering a project with the following projected cash flows:
CF0: -27,139
C01: 9,834
C02: 9,832
C03: 13,857
C04: 1,700
Calculate the Profitability Index (PI) of the project. Assume a WACC (discount rate) of 10.6%.
Enter your answer as a number with two decimal places of precision (i.e. 1.23).
Profitability index = Present value of cash inflows / initial investment
Present value of cash inflows = 9834 / (1 + 0.106)1 + 9,832 / (1 + 0.106)2 + 13,857 / (1 + 0.106)3 + 1,700 / (1 + 0.106)4
Present value of cash inflows = 8.891.500904 + 8,037.696732 + 10,242.44961 + 1,136.131009
Present value of cash inflows = $28,307.77826
Profitability index = 28,307.77826 / 27,139
Profitability index = 1.04
Company XYZ is considering a project with the following projected cash flows: CF0: -27,139 C01: 9,834...
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