What is profitability Index? Given the discount rates and the
future cash flows of each project,...
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Mechanical Engineering
What is profitability Index? Given the discount rates and thefuture cash flows of each project, which project should they acceptusing Profitability Index?
Cash Flows
Project A
Project B
Project C
Project D
Year Zero
- $ 1,500,000
- $ 1,500,000
- $ 2,000,000
- $ 2,000,000
Year One
$ 350,000
$ 400,000
$ 700,000
$ 200,000
Year Two
$ 350,000
$ 400,000
$ 600,000
$ 400,000
Year Three
$ 350,000
$ 400,000
$ 500,000
$ 600,000
Year Four
$ 350,000
$ 400,000
$ 400,000
$ 800,000
Year Five
$ 350,000
$ 400,000
$ 300,000
$ 1,000,000
Discount Rate
4%
8%
13%
18%
Answer & Explanation
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The profitability index is an index that
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