A project has an initial cost of $49,125, expected net cash inflows of $10,000 per year...

A project has an initial cost of $49,125, expected net cash inflows of $10,000 per year for 10 years, and a cost of capital of 13%. What is the project's PI? Do not round your intermediate calculations. Round your answer to two decimal places. Pls show all steps

Expert Solution

Ans 1.10

Year	Project Cash Flows (i)	DF@ 13%	DF@ 13% (ii)	PV of Project ( (i) * (ii) )

1	10000	1/((1+13%)^1)	0.885	8,849.56
2	10000	1/((1+13%)^2)	0.783	7,831.47
3	10000	1/((1+13%)^3)	0.693	6,930.50
4	10000	1/((1+13%)^4)	0.613	6,133.19
5	10000	1/((1+13%)^5)	0.543	5,427.60
6	10000	1/((1+13%)^6)	0.480	4,803.19
7	10000	1/((1+13%)^7)	0.425	4,250.61
8	10000	1/((1+13%)^8)	0.376	3,761.60
9	10000	1/((1+13%)^9)	0.333	3,328.85
10	10000	1/((1+13%)^10)	0.295	2,945.88
		PV		54,262.43


	Total of PV of Cash Inflows			54262.43
	Cash Outflows			49125

	Profitability Index =			1.10
Present value of cash Inflow / Initial Investment (Cash Outflows)				(54262.43 / 49125)

jeff jeffy answered 8 months ago

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