In: Finance
POD has a project with the following cash flows: Year Cash Flows 0 −$263,000 1 146,400 2 163,900 3 129,000 The required return is 9.2 percent. What is the profitability index for this project?
year | CF | PVIF @ 9.2% | present value |
0 | -263000 | 1.0000 | (263,000) |
1 | 146400 | 0.9158 | 134,066 |
2 | 163900 | 0.8386 | 137,446 |
3 | 129000 | 0.7679 | 99,065 |
107,578 | |||
Profitability index = (263000+107578)/263000 | |||
1.41 | |||
therefore answer = | 1.41 |