4.
What is the Profitability Index of a project that costs $30,000
today and is expected...
4.
What is the Profitability Index of a project that costs $30,000
today and is expected to generate annual cash inflows of $3,000 for
the following 12 years. Cost of capital is 6%. Round to two decimal
places.
What is the profitability index of a project that costs $8,000
and provides cash flows of $2,100 in years 1 and 2 and $4,100 in
years 3 and 4? The discount rate is 10%. (Do not round
intermediate calculations. Round your answer to 4 decimal
places.)
What is the NPV of a project that costs $120,000 today and is
expected to generate annual cash inflows of $10,000 for the next 12
years, followed by a final inflow of $21,000 in the year after. Use
discount rate of 14%. Round to the nearest cent.
What is the NPV of a project that costs $31,000 today and is
expected to generate annual cash inflows of $11,000 for the next 7
years, followed by a final inflow of $13,000 in year 8. Cost of
capital is 8.7%. Round to the nearest cent.
What is the NPV of a project that costs $111,000 today and is
expected to generate annual cash inflows of $12,000 for the next 11
years. Cost of capital (discount rate) is 11%. Round to the nearest
cent.
What is the NPV of a project that costs $38,000 today and is
expected to generate annual cash inflows of $9,000 for the next 7
years, followed by a final inflow of $15,000 in year 8. Cost of
capital is 7.4%. Round to the nearest cent.
Profitability Index
Per the strict observance of the rules of Profitability Index,
this project would be accepted because it meets the definition of
>1. But as your pointed out, there are other considerations to
factor into this decision. Most business decisions have a basis in
financial support - or reason for undertaking a project. But there
are non-quantitative reasons for undertaking or not undertaking a
project...
Class
What are some non-financial reasons for undertaking a project
that has a Profitability...
Profitability index
Estimating the cash flow generated by $1 invested in a
project
The profitability index (PI) is a capital budgeting tool that is
defined as the present value of a project’s cash inflows divided by
the absolute value of its initial cash outflow. Consider this
case:
Happy Dog Soap Company is considering investing $2,225,000 in a
project that is expected to generate the following net cash
flows:
Year
Cash Flow
Year 1
$275,000
Year 2
$500,000
Year 3
$450,000...
Calculating Profitability Index 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
−$29,500
1
16,900
2
13,600
3
8,300