Year Cash Flow 0 −$7,800 1 4,300 2 5,200 3 3,200 &nb

Year	Cash Flow
0	−$7,800
1	4,300
2	5,200
3	3,200

a. What is the profitability index for the cash flows if the relevant discount rate is 8 percent?

b. What is the profitability index for the cash flows if the relevant discount rate is 16 percent?

c. What is the profitability index for the cash flows if the relevant discount rate is 25 percent?

Expert Solution

a) Profitability Index=1+NPV/Initial Investment

Profitability Index=0.592

b)Profitability Index=0.766

c)Profitability Index=0.922

jeff jeffy answered 2 years ago

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