13.
A project has an initial cost of $38,300 and anticipated cash flows of $9,200, $18,700, $14,600 for Years 1 to 3, respectively. What is the profitability index value if the required return is 9.5 percent?
.99
.86
.92
1.16
1.09
Calculation of profitability index:
Profitability index= present value of cash inflows/initial outlay
Present value of cash inflows= (9200*[email protected]% for 1 year)+ (18700*[email protected]% for 2 year)+(14600*[email protected]% for year3)
Present value of cash inflows= (9200*0.913)+(18700*0.834)+(14600*0.762)
Present value of cash inflows= 8399.6+15595.8+11125.2= 35120.6
Profitability index= 35120.6/38300= 0.92
So correct answer is .92
13. A project has an initial cost of $38,300 and anticipated cash flows of $9,200, $18,700,...
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