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  3. you have a project with the following cash flow st

You have a project with the following cash flow stream (assume a 10% discount rate)....

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Question

Accounting

You have a project with the following cash flow stream (assume a 10% discount rate). What is the profitability index of the project? Is it acceptable?

Initial investment ($76,000)

Year 1 $20,000

Year 2 $20,000

Year 3 $20,000

Year 4 $22,000

Year 5 $32,000

Disinvestment ($4,000) at Year 5

Part A: Calculate the profitability index for this project

Part B: Is the project favorable? Why or why not?

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