Project LMK requires an initial outlay of $400,000 and has a profitability index of 1.5. The...
Project LMK requires an initial outlay of $400,000 and has a profitability index of 1.5. The project is expected to generate equal annual cash flows over the next twelve years. The required return for this project is 20%. What is project LMK's net present value? A. $600,000 B. $80,000 C. $120,000 D. $150,000
i found the same solution but the different answers so please can you check it for me
Homework Answers
Profitability Index = PV of cash inflow/PV of cash outflow
1.5 = PV of cash Inflow/400000
PV of cash inflow = 600000$
Thus NPV = PV of cash inflow-PV of cash out flow
= 600000-400000
= $200,000
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