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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...

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Finance

POD has a project withthe following cash flows:

YearCash Flows
0?$255,000
1146,800
2164,300
3129,400


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

Answer & Explanation Solved by verified expert
3.8 Ratings (545 Votes)

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)

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Transcribed Image Text

POD has a project withthe following cash flows:YearCash Flows0?$255,0001146,8002164,3003129,400The required return is 9.6 percent. What is the profitability indexfor this project?

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