True or False: Profitability index is the PV of future cash flows divided by the initial...

True or False: Profitability index is the PV of future cash flows divided by the initial investment. A result of greater than .9 is desired.

Expert Solution

Colby Messinger answered 2 years ago

What is profitability Index? Given the discount rates and the future cash flows of each project,...

What is profitability Index? Given the discount rates and the future cash flows of each project, which project should they accept using Profitability Index? Cash Flows Project A Project B Project C Project D Year Zero - $ 1,500,000 - $ 1,500,000 - $ 2,000,000 - $ 2,000,000 Year One $ 350,000 $ 400,000 $ 700,000 $ 200,000 Year Two $ 350,000 $ 400,000 $ 600,000 $ 400,000 Year Three $ 350,000 $ 400,000 $ 500,000 $ 600,000 Year Four...

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

A positive profitability index indicates a positive net present value. True or False

7.) What is the profitability index for the following set of cash flows if the relevant...

7.) 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 ?$15,300 1 9,400 2 7,600 3 4,300

What is the profitability index for an investment with the following cash flows given a 9%...

What is the profitability index for an investment with the following cash flows given a 9% required return? Year Cash flow 0 -21,000 1 7,400 2 9,800 3 8,900 0.98 0.96 1.00 1.04

What is the profitability index of a project that costs $8,000 and provides cash flows of...

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 profitability index for an investment with the following cash flows given a 8...

What is the profitability index for an investment with the following cash flows given a 8 percent required return? Year Cash Flow 0 $-20,500 1 $7,100 2 $9,700 3 $8,500 1.06 1.07 1.04 1.00 1.01

An investment costs $200,000. If the present value (PV) of all the future cash flows is...

An investment costs $200,000. If the present value (PV) of all the future cash flows is $175,000, which of the following statements is correct? a. The project should be rejected since the Profitability Index is less than 1. b. The project should be rejected since the NPV is $25,000. c. The project should be accepted since the Profitability Index is greater than 0 d. The project should be rejected since the NPV is -$175,000.

True or False A financial manager must be certain about future cash flows when making investment...

True or False A financial manager must be certain about future cash flows when making investment decisions.

a. What is the profitability index for the cash flows if the relevant discount rate is 10 percent?

Year 0 Cash Flow −$7,400Year 1 Cash Flow $2,700Year 2 Cash Flow $5,400Year 3 Cash Flow $5,000a. What is the profitability index for the cash flows if the relevant discount rate is 10 percent?b. What is the profitability index for the cash flows if the relevant discount rate is 17 percent?c. What is the profitability index for the cash flows if the relevant discount rate is 22 percent?

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