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Compute the PI statistic for Project X and note whether the firm should accept or reject...


Compute the PI statistic for Project X and note whether the firm should accept or reject the project with the cash flows shown below if the appropriate cost of capital is 11 percent. 

Time:012345
Cash flow:-78-7801138863


Multiple Choice

  • 51.00, accept

  • 29.71, accept

  • 11.00, reject

  • 138, accept





business   accounting   
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✔ Recommended Answer
Answer #1
Time Cash inflow PVF present value of cash inflows
1 -78 0.90090 -70.2702
2 0 0.81162 0
3 113 0.73119 82.62447
4 88 0.65873 57.96824
5 63 0.59345 37.38735
$107.70986

PI = present value of cash inflows/Initial investment

= 107.70986/78

= 1.38

Fourth option is the correct option

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