Question

QUESTION 8 Company kis analyzing a project with projected cash flows of $460,000 in year 1, $527,000 in year 2, $589,000 in year 3, and $540,000 in year 4. What is the profitability Index (PU) of the project if the required return is 11.25 percent and the initial cash outlay is $1,79 million? 0.94 1.11 1.06 0.90

Answer 1

The correct answer is option 4, Ignore the dollar sign in PI it will be cancelled

A B с D E F 1 Required return 11.25% 2 3 Initial investment -$1,790,000.00 4 Years $460,000.00 5 $527,000.00 6 $589,000.00 7 $540,000.00 8 9 PI $0.90 NPV(E2,B4:B7)/-B3 Profitability index is calculated by dividing the NPV of cash inflows dividing it by the initial negative cash outflow 10 11 12