A project is expected to provide cash Sows of $11,250, $12.000, $15,100, and $9,600 over the...

Question

Question

Answer 1

Answer #1

Year	Cash Flow	Discounted cash flow at 9.4%
	(A)	B= A/(1+0.094)^n
1	11250	10283
2	12000	10026
3	15100	11533
4	9600	6702
		38544

	Profitability Index = Sum of discounted cash flow / Initial Investment
or,	Initial Investment =	Sum of discounted cash flow/Profitability Index
	=	38544 / 0.725	53165

	Hence Option E looks the right answer, $53150 (nearest to 53,165)

Answer 2

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