A project is expected to provide cash flows of $10,950, $11,800, $14,900, and $9,400 over the...

A project is expected to provide cash flows of $10,950, $11,800, $14,900, and $9,400 over the next four years, respectively. At a required return of 9.2 percent, the project has a profitability index of 1.363. For this to be true, what is the project's cost at Time 0?

Multiple Choice

$27,862

$51,761

$25,540

Insufficient information.

$43,997

Expert Solution

Profitability Index (PI) is calculated as Present value of future cashflows divided by initial investment.

i) Initial Investment	Let it be x
ii) Sum of present value of future cashflows	37,975.93
PI (ii/i)	1.363

	Year	Cashflows	Discounting factor	present value
	1	10950	0.9157509	10,027.47
	2	11800	0.8385997	9,895.48
	3	14900	0.7679485	11,442.43
	4	9400	0.7032495	6,610.55
		Total		37,975.93

	1.363=	37975.93/x
	So x=	27,862.02

	So correct answer is option a i.e. $27862

jeff jeffy answered 1 year ago

A project is expected to provide cash flows of $12,150, $12,600, $15,700, and $10,200 over the...

A project is expected to provide cash flows of $12,150, $12,600, $15,700, and $10,200 over the next four years, respectively. At a required return of 8.5 percent, the project has a profitability index of .898. For this to be true, what is the project's cost at Time 0? Multiple Choice $46,273 $42,417 $31,717 Insufficient information. $37,315

A project with an initial cost of $30,700 is expected to provide cash flows of $10,950,...

A project with an initial cost of $30,700 is expected to provide cash flows of $10,950, $11,800, $14,900, and $9,400 over the next four years, respectively. If the required return is 9.2 percent, what is the project's profitability index? 1.392 1.031 1.134 1.237 .808

A project that provides annual cash flows of $2,500 for 7 years costs $9,400 today. ...

A project that provides annual cash flows of $2,500 for 7 years costs $9,400 today. Required: (a) If the required return is 9 percent, what is the NPV for this project? (b) Determine the IRR for this project. rev: 09_18_2012, 09_26_2017_QC_C

A project has expected cash flows of $55 next year (year 1). These cash flows will...

A project has expected cash flows of $55 next year (year 1). These cash flows will grow at 6% per year through year 6. Growth from year 6 to 7 will be -2%, and this negative growth will continue in perpetuity. Assume a discount rate of 8%. What is the present value today (year 0) of these cash flows? DO BY HAND

Gio's Restaurants is considering a project with the following expected cash flows: Year Project Cash Flow...

Gio's Restaurants is considering a project with the following expected cash flows: Year Project Cash Flow (millions) 0 $(180) 1 80 2 75 3 80 4 95 If the project's appropriate discount rate is 12 percent, what is the project's discounted payback period? The project's discounted payback period is ___ years.

You are considering a project with an initial cash outlay of $72,000 and expected cash flows...

You are considering a project with an initial cash outlay of $72,000 and expected cash flows of $22,320 at the end of each year for six years. The discount rate for this project is 10.5 percent. a. What are the project's payback and discounted payback periods? b. What is the project's NPV? c. What is the project's PI? d. What is the project's IRR? a. The payback period of the project is nothing years.

You are considering a project with an initial cash outlay of $87000 and expected cash flows...

You are considering a project with an initial cash outlay of $87000 and expected cash flows of $23490 at the end of each year for six years. The discount rate for this project is 10.1 percent. a. What are the project's payback and discounted payback periods? b. What is the project's NPV? c. What is the project's PI? d. What is the project's IRR?

a project with an initial cost of $73,600 is expected to generate annual cash flows of...

a project with an initial cost of $73,600 is expected to generate annual cash flows of $16,360 for the next 8 years. what is the projects internal rate of retu

A company is considering a project that costs $150,000 and is expected to generate cash flows...

A company is considering a project that costs $150,000 and is expected to generate cash flows of $50,000, $52,000, $53,000 in the coming three years. Which of the following is correct? A. The project must have a postive net present value. B. The project must be accepted by the payback rule. C. The project must be accepted by the discounted payback rule. D The project must have an internal rate of return lower than 2% E. None of the above....

19) A firm is considering a project that is expected to generate annual cash flows of...

19) A firm is considering a project that is expected to generate annual cash flows of $24,000 for 15 years. The project requires an initial investment of $247,103.44. The cost of capital is 8.13%. What is the IRR of the project?

Question