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Year Cash Flow 0 −$8,400           1 3,900           2 3,300           3 5,800      &nb

Year Cash Flow
0 −$8,400          
1 3,900          
2 3,300          
3 5,800          

  

a. What is the profitability index for the cash flows if the relevant discount rate is 8 percent?

  

b. What is the profitability index for the cash flows if the relevant discount rate is 18 percent?

  

c. What is the profitability index for the cash flows if the relevant discount rate is 23 percent?
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Answer #1

Calculate the Profitability index as follows:

Formulas:

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