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Project S has a cost of $10,000 and is expected to produce benefits (cash flows) of...

Project S has a cost of $10,000 and is expected to produce benefits (cash flows) of $3,000 per year for 5 years. Project L costs $25,000 and is expected to produce cash flows of $7,400 per year for 5 years.

Calculate the two projects' PIs, assuming a cost of capital of 12%. Do not round intermediate calculations. Round your answers to three decimal places.

Project S:  

Project L:  

Solutions

Expert Solution

Solution :

The Profitability Index of Project S = 1.081

The Profitability Index of Project L = 1.067

Please find the attached screenshot of the excel sheet containing the detailed calculation for the solution.

jeff jeffy answered 1 year ago
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