Question

Profitability Index

A project has an initial cost of $73,575, expected net cash inflows of $14,000 per year for 9 years, and a cost of capital of 8%. What is the project's PI? Do not round your intermediate calculations. Round your answer to two decimal places.

Answer 1

Answer:

Profitability Index          = Annual Net cash inflows x PVAF ( 8%, 9 Years ) / initial Investment          =   ($ 14,000 x 6.2469) / $ 73,575          = $ 87,456.60 / $ 73,575          =   1.19

Profitability Index      =   1.19