Lloyd's Systems is considering the following two projects. Please calculate the Profitability Index for Projects A...

Lloyd's Systems is considering the following two projects. Please calculate the Profitability Index for Projects A and B. (Hurdle Rate = 9.50%)

Year: 0 1 2 3 4

Cash flows-A: -$2,000 $600 $650 $700 $750

Cash flows-B: -$4,000 $1,300 $1,350 $1,400 $1,450

Expert Solution

jeff jeffy answered 1 year ago

What is the projects profitability index?

For the following two projects, determine the Payback Period Discounted Payback Net Present Value Profitability Index...

For the following two projects, determine the Payback Period Discounted Payback Net Present Value Profitability Index (Benefit-Cost Ratio) Internal Rate of Return Modified Internal Rate of Return Project A Project B Year Net Income Cash Flow Net Income Cash Flow 0 (15,000) (19,000) 1 5,000 6,000 3,000 4,000 2 5,000 6,000 5,000 6,000 3 5000 6,000 7,000 8,000 4 5,000 6,000 11,000 12,000 Risk Index 1.80 .60 The firm’s cost of capital ko is 15% and the risk free...

Calculating Profitability Index What is the profitability index for the following set of cash flows if...

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

Calculate the profitability index (PI) for the following cash flows if the relevant discount rate is...

Calculate the profitability index (PI) for the following cash flows if the relevant discount rate is 10% Year Cash Flow 0 -15,300 1 9,400 2 7,600 3 4,300

Calculate the Profitability Index and the Net Present Value of the following project: Year 0 Investment...

Calculate the Profitability Index and the Net Present Value of the following project: Year 0 Investment 75,000 Year 1 Income 25,000 PI ______________ Year 2 Income 35,000 Year 3 Investment 10,000 NPV ____________ Year 4 Income 40,000 Discount Rate 9% Go or No Go?

Profitability Index Per the strict observance of the rules of Profitability Index, this project would be...

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...

10. Which is typically higher the regular Profitability Index or the Modified Profitability index for the...

10. Which is typically higher the regular Profitability Index or the Modified Profitability index for the same project?

. For each project, calculate the NPV, IRR, profitability index (PI) and the payback period. For...

. For each project, calculate the NPV, IRR, profitability index (PI) and the payback period. For each capital budgeting decision tool, indicate if the project should be accepted or rejected, assuming that each project is independent of the others. Important Note: The venture capital folks have a firm maximum payback period of four years. Project A= Required rate of Return= 16.30% Project B= R= 12.50% Project C= R= 15.35% Project D= R= 17.25% Expected cash flows for the four...

A machine costs $10,000 and has a discount rate of 7.5%. Calculate the profitability index of...

A machine costs $10,000 and has a discount rate of 7.5%. Calculate the profitability index of the project if the net present value of cash inflows is $4,600 in year 1, $3,400 in year 2, $2,600 in year 3, and $1,500 in year 4 when the machine is sold to salvage dealer. A. 2.38 B. 2.21 C. 2.04 D. 1.21 E. 1.04 . A project costs $6,000 and has a discount rate of 7.5%. Calculate the profitability index of the...

Upton evaluates future projects by using the profitability index. The company is currently reviewing five similar...

Upton evaluates future projects by using the profitability index. The company is currently reviewing five similar projects and must choose one of the following: Project Initial Investment Present Value of Cash Inflows 1 $ 100,000 $ 97,000 2 50,000 80,000 3 75,000 110,000 4 60,000 100,000 5 150,000 200,000 Which project should Upton select if the decision is based entirely on the profitability index? Multiple Choice Project 1. Project 2. Project 3. Project 4. Project 5. q2. The pool rate...

Question