A project with an initial cost of $58,000 is expected to provide annual cash flows of $11,250 over the 7-year life of the project. If the required return is 9.4 percent, what is the project's profitability index?
.963
1.084
1.038
.803
.883
Present value of inflows=cash inflow*Present value of discounting factor(rate%,time period)
=11250/1.094+11250/1.094^2+................+11250/1.094^7
=55868.6955
PI=Present value of inflows/Present value of outflows
=55868.6955/58,000
=0.963(Approx).
A project with an initial cost of $58,000 is expected to provide annual cash flows of...
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