Question

A project has an initial outlay of $1,921. It has a single payoff at the end of year 5 of $9,385. What is the profitability index (PI) of the project, if the company's cost of capital is 14.24 percent? Round the answer to two decimal places.

Answer 1

F1143 fa -SUM(F1137:F1142) $ Pvcf (1,921.00) I $ 1134 1135 1136 1137 1138 1139 1140 1141 1142 1143 1144 1145 1146 1147 Cashflows [email protected]% $ (1,921.00) 0.87535014 0.766237868 0.670726425 0.58712047 $ 9,385.00 0.513935986 NPV 1+NPV/Initial investment) 1+(2902.29/1921) 2.51 $ $ $ $ 4,823.29 2,902.29 Profitability Index

F1143 - fx =SUM(F1137:F1142) B C E 1134 1135 1136 Cashflows [email protected]% 1137 -1921 1138 1139 1140 1141 OOO Pvcf =D1137*E1137 =D1138*E1138 =D1139*E1139 =D1140*E1140 =D1141*E1141 =D1142*E1142 =SUM(F1137:F1142) =E1137/1.1424 =E1138/1.1424 =E1139/1.1424 =E1140/1.1424 =E1141/1.1424 NPV 9385 1142 1143 1144 Profitability Index 1145 1146 1147 1+(NPV/Initial investment) 1+(2902.29/1921) =1+(F1143/1921)