POD has a project with the following cash flows: Year Cash Flows -$273,000 145,900 163,400 128,500...

Question

Question

Answer 1

Answer #1

Profitability Index = Present Value of Cash Inflows / Initial Investment

= [ $ 145,900 * 1/(1.087) ^ 1+ $ 163,400 * 1/(1.087) ^ 2 + $ 128,500 * 1/(1.087) ^3 ] / $ 273,000

= $ 372,562.73 / $ 273,000

=1.364698645

Hence, the correct answer is 1.365

Answer 2

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