You have a project with a profitability index of 0.86. Should you accept or reject the...
You have a project with a profitability index of 0.86. Should you accept or reject the project?
Homework Answers
Reject as it is less than 1
When PI is less than 1 then present value of future CF is less than 1
leading to negative NPV
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You have a project with a profitability index of 0.86. Should you accept or reject the...
You are analyzing a project and have prepared the following data: Year Cash Flow $169,000 $46,200...
You are analyzing a project and have prepared the following
data: Year Cash Flow $169,000 $46,200 I$87,300 $41,000 I$39,000 1
12 4 Required payback period 2.5 years Required return 8.50% the
project. Based on the profitability index of 0.97; accept for this
project, you should 1.05; accept 1.18; accept 0.97; reject 1.05;
reject
Question 15 You are analyzing a project and have prepared the following data: Year Cash Flow $169,000 $46,200 $87,300 $41,000 $39,000 Required payback period 2.5 years Required...
You are analyzing a project and have gathered the following data: Year Cash Flow 0 -$175,000...
You are analyzing a project and have gathered the following data: Year Cash Flow 0 -$175,000 1 $56,400 2 $61,800 3 $72,000 4 $75,000 Cost of capital is 14%. Based on the profitability index of _____ for this project, you should _____ the project, using the new method. 0.1345; accept 0.0859; accept 0.0406; accept -0.0414; reject -0.0785; reject
If we have two independent projects: Project Astudent has a positive NPV of $25,000 and a...
If we have two independent projects: Project Astudent has a positive NPV of $25,000 and a Profitability Index (PI) of 1.1, while Project Gummie has an NPV of $12,000 and a Profitability Index (PI) of 1.6 then you should A) Accept only project Astudent because B) Accept only project Gummi because C) Accept both projects because D) Reject both projects becasue
Compute the Pl statistic for Project X and note whether the firm should accept or reject...
Compute the Pl statistic for Project X and note whether the firm should accept or reject the project with the cash flows shown below if the appropriate cost of capital is 11 percent. Time: Cash flow: 0 12 13 14 15 -78 -7810 103178 153 Multiple Choice 0 8.90, reject 0 1.11, accept 0 29.95, accept 0 11.00, reject
Compute the Pl statistic for Project X and note whether the firm should accept or reject...
Compute the Pl statistic for Project X and note whether the firm should accept or reject the project with the cash flows shown below if the appropriate cost of capital is 9 percent Time: 4 5 Cash flow -76 -76 101 76 51 Multiple Choice 125, ассерt 42.86, accept 9.00, reject Multiple Choice 1.25, ассеpt 42.86, ассеpt 9.00, reject 19.25, accept
Compute the PI statistic for Project X and note whether the firm should accept or reject...
Compute the PI statistic for Project X and note whether the firm should accept or reject the project with the cash flows shown below if the appropriate cost of capital is 11 percent. Time:012345Cash flow:-78-7801138863Multiple Choice51.00, accept29.71, accept11.00, reject138, accept
EXCEL SOLUTION NEEDED PLEASE: EXCEL FORMULA The profitability index is the present value of the future...
EXCEL SOLUTION NEEDED PLEASE: EXCEL FORMULA The profitability index is the present value of the future cash flows divided by the initial investment. If you remember, the NPV function really only calculates the present value of future cash flows, so we will use the NPV function divided by the initial investment to calculate the profitability index as follows: Suppose we have a project with the following cash flows and required return. What is the profitability index of the project? t...
Making the accept or reject decision Pheasant Pharmaceuticals's decision to accept or reject project Alpha is...
Making the accept or reject decision Pheasant Pharmaceuticals's decision to accept or reject project Alpha is independent of its decisions on other projects. If the firm follows the NPV method, it should project Alpha. Which of the following statements best explains what it means when a project has an NPV of $0? When a project has an NPV of $0, the project is earning a rate of return less than the project's weighted average cost of capital. It's OK to...
Estimating the cash flow generated by $1 invested in a project The profitability index (PI) is...
Estimating the cash flow generated by $1 invested in a project The profitability index (PI) is a capital budgeting tool that is defined as the present value of a project's cash inflows divided by the absolute value of its initial cash outflow. Consider this case: Happy Dog Soap Company is considering investing $2,750,000 in a project that is expected to generate the following net cash flows: Year Year 1 Year 2 Year 3 Year 4 Cash Flow $350,000 $450,000 $475,000...
Compute the payback statistic for Project B and decide whether the firm should accept or reject...
Compute the payback statistic for Project B and decide whether the firm should accept or reject the project with the cash flows shown as follows if the appropriate cost of capital is 12 percent and the maximum allowable payback is three years. Project B Time 0 1 2 3 4 5 Cash Flow -$11,000 $3,350 $4,180 $1,520 $0 $1,000
You are analyzing a project and have prepared the following
data: Year Cash Flow $169,000 $46,200 I$87,300 $41,000 I$39,000 1
12 4 Required payback period 2.5 years Required return 8.50% the
project. Based on the profitability index of 0.97; accept for this
project, you should 1.05; accept 1.18; accept 0.97; reject 1.05;
reject
Question 15 You are analyzing a project and have prepared the following data: Year Cash Flow $169,000 $46,200 $87,300 $41,000 $39,000 Required payback period 2.5 years Required...
Compute the Pl statistic for Project X and note whether the firm should accept or reject the project with the cash flows shown below if the appropriate cost of capital is 11 percent. Time: Cash flow: 0 12 13 14 15 -78 -7810 103178 153 Multiple Choice 0 8.90, reject 0 1.11, accept 0 29.95, accept 0 11.00, reject
Compute the Pl statistic for Project X and note whether the firm should accept or reject the project with the cash flows shown below if the appropriate cost of capital is 9 percent Time: 4 5 Cash flow -76 -76 101 76 51 Multiple Choice 125, ассерt 42.86, accept 9.00, reject Multiple Choice 1.25, ассеpt 42.86, ассеpt 9.00, reject 19.25, accept
Making the accept or reject decision Pheasant Pharmaceuticals's decision to accept or reject project Alpha is independent of its decisions on other projects. If the firm follows the NPV method, it should project Alpha. Which of the following statements best explains what it means when a project has an NPV of $0? When a project has an NPV of $0, the project is earning a rate of return less than the project's weighted average cost of capital. It's OK to...
Estimating the cash flow generated by $1 invested in a project The profitability index (PI) is a capital budgeting tool that is defined as the present value of a project's cash inflows divided by the absolute value of its initial cash outflow. Consider this case: Happy Dog Soap Company is considering investing $2,750,000 in a project that is expected to generate the following net cash flows: Year Year 1 Year 2 Year 3 Year 4 Cash Flow $350,000 $450,000 $475,000...
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