Profitability index problem

Business & Finance
Tutor: None Selected Time limit: 1 Day

Find the profitability index (PI) for the following series of future cash flows, assuming the company’s cost of capital is 8.60 percent. The initial outlay is $306,089.

Year 1: $189,014

Year 2: $158,738

Year 3: $194,863

Year 4: $130,604

Year 5: $167,723

Round the answer to two decimal places.

Oct 3rd, 2015

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the profitability index (PI) = PV of future cash flows/ initial investment

Year 0: ($306,089)

Year 1: $189,014

Year 2: $158,738

Year 3: $194,863

Year 4: $130,604

Year 5: $167,723

NPV= $359,613.10

PI= $359,613.10/$306,089 = 1.17

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Sep 22nd, 2015

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