An investment that costs $5,000 will produce annual cash flows of $2,000 for a period of...

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An investment that costs $5,000 will produce annual cash flows of $2,000 for a period of...

An investment that costs $5,000 will produce annual cash flows of $2,000 for a period of 4 years. Given a desired rate of return of 10%, what is the present value index? Use Appendix Table 2. (Do not round your intermediate calculations. Round your answer to three decimal points.)

business accounting

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Answer 1

Answer #1

Present value index = Present value of cash inflow/Present value of cash outflow

= (2000*3.16987)/5000

Present value index = 1.268 Times

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Answer 2

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