Caspian Sea Drinks is considering buying the J-Mix 2000. It will allow them to make and sell more product. The machine cost $1.65 million and create incremental cash flows of $629,850.00 each year for the next five years. The cost of capital is 9.03%. What is the profitability index for the J-Mix 2000?
Profitability index = Present value of cash flows / Initial investment
Profitability index = ($629,850.00/1.0903 + $629,850.00/1.0903^2 + $629,850.00/1.0903^3 + $629,850.00/1.0903^4 + $629,850.00/1.0903^5) / $1,650,000
Profitability index = 1.484
Caspian Sea Drinks is considering buying the J-Mix 2000. It will allow them to make and...
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