Question

What´s the probability index (PI) for the following set of cash flows if the relevant discount rate is 18%.

0. year = 50 000$ (initial investment) 1.year = 18 000$ 2.year = 17 500$ 3. year = 18 500$

Is this project feasible or not according to PI?

Answer #1

The Profitability index (PI) = Present value of future cash flows/Initial investment | ||||||

Present Value = Future value/ ((1+r)^t) | ||||||

where r is the interest rate that is 18% and t is the time period in years. | ||||||

t | 0 | 1 | 2 | 3 | ||

cash flow | -50000 | 18000 | 17500 | 18500 | ||

present value | 15254.24 | 12568.23 | 11259.67 | |||

sum of present values | 39082.14 | |||||

PI | 39082.14/50000 | |||||

PI | 39082.14/50000 | |||||

PI | 0.781643 | |||||

The PI is .78. | ||||||

According to the PI, the project is not feasible because the PI | ||||||

is less than 1. |

What is the profitability index for the following set of cash
flows if the relevant discount rate is 10 percent? What if the
discount rate is 15 percent? If it is 22 percent? Year Cash
Flow
0 -16,700
1-9,700
2 -7,800
3 - 4,300

What is the profitability index of a project with the following
cash flows if the discount rate is 10 percent? Year CFs 0 -802 1
761 2 497 3 376

1.
What is the payback period for the following set of cash
flows?
Year
Cash Flow
0
−$ 8,000
1
2,800
2
1,000
3
2,900
4
2,100
Multiple Choice
3.57 years
3.80 years
3.64 years
3.92 years
3.62 years
2.
An investment project provides cash inflows of $650 per year
for 8 years.
a. What is the project payback period if the
initial cost is $3,250?
b. What is the project payback period if...

Profitability index.??Given the discount rate and the future
cash flow of each project listed in the following? table, use the
PI to determine which projects the company should accept. ??Cash
Flow Project A Project B ??Year 0 minus?$2 comma 100 comma 000
minus?$2 comma 500 comma 000 ??Year 1 ?$650 comma 000 ?$1 comma 250
comma 000 ??Year 2 ?$750 comma 000 ?$1 comma 150 comma 000 ??Year 3
?$850 comma 000 ?$1 comma 050 comma 000 ??Year 4 ?$950...

Given the following cash flows.
A profitability index equal to 1.164615
A12% discount rate.
Estimate the initial outlay and the MIRR.
Years
CFt
0
XXX,000?
1
$275,000
2
$275,000
3
$275,000
4
$275,000
5
$275,000
6
$0
7
($150,000)

Based on the profitability index (PI) rule, should a project
with the following cash flows be accepted if the discount rate is
8%? Why Year or why not? Cash Flow $18,600 S10,000 I$7,300 I$3,700
2 yes,because the Pl is 1.008 yes; because the Pl is 0.992. yes;
because the Pl is 0.999 no; because the Pl is 1.008 no because the
Pl is 0,992

Based on the profitability index rule, should a project with the
following cash flows be accepted if the discount rate is 15
percent? Why or why not? (i.e. Calculate the profitability index
(PI) and explain why the project should or should not be
accepted.)
Year: 0,1,2,3
Cash Flow: -32100, 11,800, 0, 22,600

For the following set of cash flows, year,0,1,2,3,cash
flow,-8,000,6,700,6,800,6,100(a) what is the NPV at a discount rate
of 0 percent?(b) what is the NPV at a discount rate of 12 percent?
(C) what is the NPV at a discount rate of 18 percent? (D) what is
the NPV at a discount rate of 23 percent?

Profitability index. Given the discount rate and the future cash
flow of each project listed in the following table, use the PI to
determine which projects the company should accept.
What is the PI of project A?
What is the PI of Project B?
Cash Flow
Project A
Project B
Year 0
−$2,000,000
−$2,300,000
Year 1
$600,000
$1,150,000
Year 2
$700,000
$1,050,000
Year 3
$800,000
$950,000
Year 4
$900,000
$850,000
Year 5
$1,000,000
$750,000
Discount rate
5%
16%

Year
Cash Flows
0
-17189
1
11331
2
9978
3
6764
What is the profitability index for the set of cash flows if the
relevant discount rate is 9 percent? (Do not round
intermediate calculations and round your final answer to 3 decimal
places. (e.g., 32.161))

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 30 minutes ago

asked 42 minutes ago

asked 48 minutes ago

asked 48 minutes ago

asked 50 minutes ago

asked 55 minutes ago

asked 55 minutes ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 2 hours ago