Question

Compute the PI statistic for Project Q if the appropriate cost of capital is 13 percent....

Compute the PI statistic for Project Q if the appropriate cost of capital is 13 percent. (Do not round intermediate calculations and round your final answer to 2 decimal places.)

Project Q
Time: 0 1 2 3 4
Cash flow: −$11,800 $3,750 $4,580 $1,920 $2,550



Should the project be accepted or rejected?

  • rejected

  • accepted

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Answer #1
Cash Flows for 4 Years
Year CF PVF@ 13% Disc CF
1 $     3,750.00     0.8850 $     3,318.58
2 $     4,580.00     0.7831 $     3,586.81
3 $     1,920.00     0.6931 $     1,330.66
4 $     2,550.00     0.6133 $     1,563.96
PV of cash Inflows $    9,800.01
PV of cash Outflows $ 11,800.00
Profitability Index:                0.83
Reject the Project as PI < 1

Pls do rate, if the answer is correct and comment, if any further assistance is required.

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