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Dax Systems is considering a project that has the following cash flows for Project X and...
Dax Systems is considering a project that has the following cash flows for Project X and Y. What is the PI of X, using the new method? Cost of Capital = 10% Year Project X Project Y 0 -$1,000 -$2,000 1 $500 $1,400 2 $500 $800 3 $500 $400 0.243 0.201 0.545 0.920 0.117
Solutions
Expert Solution
| Statement showing Cash flows | ||||
| Particulars | Time | PVf 10% | Amount | PV |
| Cash Outflows | - | 1.00 | (1,000.00) | (1,000.00) |
| PV of Cash outflows = PVCO | (1,000.00) | |||
| Cash inflows | 1.00 | 0.9091 | 500.00 | 454.55 |
| Cash inflows | 2.00 | 0.8264 | 500.00 | 413.22 |
| Cash inflows | 3.00 | 0.7513 | 500.00 | 375.66 |
| PV of Cash Inflows =PVCI | 1,243.43 | |||
| PI = PVCI/PVCO | 1.24 | |||
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