Question

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

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?  

Homework Answers

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.
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
What is the profitability index for the following set of cash flows if the relevant discount...
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...
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...
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...
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...
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...
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...
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...
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...
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...
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))