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A project has the following cash flows: Year Cash Flows 0 ?$127,800 1 47,000 2 63,800...

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Finance

A project has the following cash flows: Year Cash Flows 0?$127,800 1 47,000 2 63,800 3 51,600 4 28,100 The required returnis 8.3 percent. What is the profitability index for thisproject?

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3.8 Ratings (588 Votes)

Ans 1.24

Year Project Cash Flows (i) DF@ 8.3% DF@ 8.3% (ii) PV of Project B( (i) * (ii) )
1 47000 1/((1+8.3%)^1) 0.923                     43,397.97
2 63800 1/((1+8.3%)^2) 0.853                     54,395.60
3 51600 1/((1+8.3%)^3) 0.787                     40,622.28
4 28100 1/((1+8.3%)^4) 0.727                     20,426.43
NPV                  1,58,842.28
Total of PV of Cash Inflows 158842.28
Cash Outflows 127800
Profitability Index = 1.24
Present value of cash Inflow / Initial Investment (Cash Outflows) (158842.28 / 127800)

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A project has the following cash flows: Year Cash Flows 0?$127,800 1 47,000 2 63,800 3 51,600 4 28,100 The required returnis 8.3 percent. What is the profitability index for thisproject?

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