A project has an initial outlay of $1,173. It has a single payoff at the end...
A project has an initial outlay of $1,173. It has a single payoff at the end of year 8 of $9,977. What is the profitability index (PI) of the project, if the company’s cost of capital is 6.73 percent? Round the answer to two decimal places.
Homework Answers
| Profitability index (PI) of the project | = | Present value of cash inflows/Initial cash outlay | |||||||
| = | $ 5,925.27 | / | $ 1,173.00 | ||||||
| = | 5.05 | ||||||||
| Working: | |||||||||
| Present value of cash inflows | = | 9977*(1.0673^-8) | |||||||
| = | $ 5,925.27 | ||||||||
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