Question

In: Finance

Compute the PI statistic for Project X and note whether the firm should accept or reject...

Compute the PI statistic for Project X and note whether the firm should accept or reject the project with the cash flows shown below if the appropriate cost of capital is 6 percent. Time: 0 1 2 3 4 5 Cash flow:-84 -84 0 109 84 59

Solutions

Expert Solution

Ans) 1.46, The firm should accept the project since PI is greater than 1.

Year Project Cash Flows (i) DF@ 6% DF@ 6% (ii) PV of Project A ( (i) * (ii) )
1 -84 1/((1+6%)^1) 0.943                           (79.25)
2 0 1/((1+6%)^2) 0.890                                    -  
3 109 1/((1+6%)^3) 0.840                             91.52
4 84 1/((1+6%)^4) 0.792                             66.54
5 59 1/((1+6%)^5) 0.747                             44.09
Total                           122.90
Total of PV of Cash Inflows 122.90
Cash Outflows 84
Profitability Index = 1.46
Present value of cash Inflow / Initial Investment (Cash Outflows) (122.90 / 84)

jeff jeffy answered 9 months ago
Next > < Previous

Related Solutions

Compute the PI statistic for Project X and note whether the firm should accept or reject...
Compute the PI statistic for Project X and note whether the firm should accept or reject the project with the cash flows shown as follows if the appropriate cost of capital is 10%. Time 0 1 2 3 4 5 Cash Flow -250 75 0 100 75 50 a) 2.41, accept b) 0.023, reject c) 0.90, reject d) 1.97, accept
Compute the PI statistic for Project X and note whether the firm should accept or reject...
Compute the PI statistic for Project X and note whether the firm should accept or reject the project with the cash flows shown below if the appropriate cost of capital is 8 percent. Time: 0, 1, 2, 3, 4, 5 Cash Flow: -82, -82, 0, 117, 92, 67 Time: 0 1 2 3 4 5 Cash flow: -82 -82 0 117 92 67 Multiple Choice 48.17 percent, reject 8.00 percent, accept 58.74 percent, accept 47.21 percent, reject All information is...
Compute the PI statistic for Project X and note whether the firm should accept or reject...
Compute the PI statistic for Project X and note whether the firm should accept or reject the project with the cash flows shown below if the appropriate cost of capital is 10 percent.   Time: 0 1 2 3 4 5   Cash flow: -75 -75 0 100 75 50
Compute the PI statistic for Project X and note whether the firm should accept or reject...
Compute the PI statistic for Project X and note whether the firm should accept or reject the project with the cash flows shown below if the appropriate cost of capital is 10 percent.   Time: 0 1 2 3 4 5   Cash flow: -80 -80 0 115 90 65   
1.      Compute the IRR for Project X and note whether the firm should accept or reject...
1.      Compute the IRR for Project X and note whether the firm should accept or reject the project with the cash flows shown as follows if the appropriate cost of capital is 9 percent. Time: 0 1 2 3 4 5 Cash flow: ?1,000 ?75 100 100 0 2,000 A.      9 PERCENT, ACCEPT B.       9 PERCENT, REJECT C.       16.61 PERCENT, ACCEPT D.      16.61 PERCENT, REJECT
Compute the Discounted Payback statistic for Project X and recommend whether the firm should accept or...
Compute the Discounted Payback statistic for Project X and recommend whether the firm should accept or reject the project with the cash flows shown below if the appropriate cost of capital is 14 percent and the maximum allowable discounted payback is 3 years. Time: 0 1 2 3 4 5 Cash flow: -960 460 520 440 340 190 Compute the PI statistic for Project X and note whether the firm should accept or reject the project with the cash flows...
Compute the Discounted Payback statistic for Project X and recommend whether the firm should accept or...
Compute the Discounted Payback statistic for Project X and recommend whether the firm should accept or reject the project with the cash flows shown below if the appropriate cost of capital is 12 percent and the maximum allowable discounted payback is 3 years.   Time: 0 1 2 3 4 5   Cash flow: -980 380 600 520 420 270 Multiple Choice 2.78 years, accept 3.44 years, reject 2.44 years, accept 4.78 years, reject
Compute the payback statistics (Not discounted) for Project X and recommend whether the firm should accept...
Compute the payback statistics (Not discounted) for Project X and recommend whether the firm should accept or reject the project with the cash flows shown as follows if the appropriare cost of capital is 10 percent and the maximum allowable payback is five years. Time:                  0        1      2        3         4       5 Cash flow:        -75   -75     0     100     75     50 a. 3.67 years, accept b. 4.67 years, accept c. 3.67 years, reject d. 4.67 years, reject
Compute the Profitability Index statistic for 345 Rayzor Sharp Project and note whether the firm should...
Compute the Profitability Index statistic for 345 Rayzor Sharp Project and note whether the firm should accept or reject the project with the cash flows shown below if the appropriate cost of capital is 10 percent. CF0 = -1000 CF1 = 500 CF2 = 480 CF3 = 400 CF4 = 300 CF5 = 150 0.19, reject 0.45, reject 1.19, accept 1.45, accept
Compute the Profitability Index statistic for 345 Rayzor Sharp Project and note whether the firm should...
Compute the Profitability Index statistic for 345 Rayzor Sharp Project and note whether the firm should accept or reject the project with the cash flows shown below if the appropriate cost of capital is 10 percent. CF0 = -1000 CF1 = 500 CF2 = 480 CF3 = 400 CF4 = 300 CF5 = 150 0.19, reject 0.45, reject 1.19, accept 1.45, accept
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT