POD has a project with the following cash flows: Year Cash Flows 0 −$255,000 1 146,800...

POD has a project with the following cash flows:

Year	Cash Flows
0	−$255,000
1	146,800
2	164,300
3	129,400

The required return is 9.6 percent. What is the profitability index for this project?

Expert Solution

Ans 1.45

Year	Project Cash Flows (i)	DF@ 9.6%	DF@ 9.6% (ii)	PV of Project A ( (i) * (ii) )

1	146800	1/((1+9.6%)^1)	0.912	1,33,941.61
2	164300	1/((1+9.6%)^2)	0.832	1,36,778.06
3	129400	1/((1+9.6%)^3)	0.760	98,288.48
		NPV		3,69,008.15



	Total of PV of Cash Inflows			369008.15
	Cash Outflows			255000

	Profitability Index =			1.45
Present value of cash Inflow / Initial Investment (Cash Outflows)				(369008.15/ 255000)

jeff jeffy answered 2 years ago

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