What is the profitability index of a normal project that has an initial cost of $3,284,390...
What is the profitability index of a normal project that has an initial cost of $3,284,390 (i.e., CF0 = - 3283390) and an NPV of $1,935,830? Assume that this project has an expected rate of return (i.e., the project’s cost of capital) of 16.0% and an IRR of 23.2%.
Homework Answers
| NPV | 1935830 | |||
| Add: Initial investment | 3284390 | |||
| Present value of inflows | 5220220 | |||
| Divide: Initial Investment | 3284390 | |||
| Profitability Index | 1.59 | |||
| (Present value of inflows/ Initial investment) | ||||
| Answer is 1.59 | ||||
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What is the profitability index of a normal project that has an
initial cost of $3,284,390...
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