Question

A project has an initial cost of $35,000, expected net cash inflows of $11,000 per year...

A project has an initial cost of $35,000, expected net cash inflows of $11,000 per year for 11 years, and a cost of capital of 8%. What is the project's PI? (Hint: Begin by constructing a time line.) Do not round intermediate calculations. Round your answer to two decimal places.

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Answer #1
Year Cashflows ($) Discounting factor @ 8% Present value of cashflows ($)
0 -35000 1 -35000
1 11000 0.925925926 10185.18519
2 11000 0.85733882 9430.727023
3 11000 0.793832241 8732.154651
4 11000 0.735029853 8085.328381
5 11000 0.680583197 7486.415167
6 11000 0.630169627 6931.865896
7 11000 0.583490395 6418.394348
8 11000 0.540268885 5942.95773
9 11000 0.500248967 5502.738638
10 11000 0.463193488 5095.128369
11 11000 0.428882859 4717.711453
NPV 43528.60684
PI= (NPV+Initial investment)/Initial investment
(43528.60684+35000)/35000
2.24
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