Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. you are offered an investment with returns of $ 2,

You are offered an investment with returns of $ 2,847 in year 1, $ 4,914 in...

Free

50.1K

Verified Solution

Question

Finance

You are offered an investment with returns of $ 2,847 in year 1,$ 4,914 in year 2, and $ 3,048 in year 3. The investment will costyou $ 7,014 today. If the appropriate Cost of Capital (quotedinterest rate) is 9.1 %, what is the Profitability Index of theinvestment? Enter your answer to the nearest .01. Do not use the $sign or commas in your answer. If the NPV is negative, use the -sign.

Answer & Explanation Solved by verified expert
3.6 Ratings (297 Votes)

Ans Profitability Index of the investment   = 1.30

Year Project Cash Flows (i) DF@ 9.1% DF@ 9.1% (ii) PV of Project A ( (i) * (ii) )
1 2847 1/((1+9.1%)^1) 0.917                       2,609.53
2 4914 1/((1+9.1%)^2) 0.840                       4,128.44
3 3048 1/((1+9.1%)^3) 0.770                       2,347.15
PV                       9,085.12
Total of PV of Cash Inflows 9085.12
Cash Outflows 7014
Profitability Index = 1.30
Present value of cash Inflow / Initial Investment (Cash Outflows) (9085.12 / 7014)

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Transcribed Image Text

You are offered an investment with returns of $ 2,847 in year 1,$ 4,914 in year 2, and $ 3,048 in year 3. The investment will costyou $ 7,014 today. If the appropriate Cost of Capital (quotedinterest rate) is 9.1 %, what is the Profitability Index of theinvestment? Enter your answer to the nearest .01. Do not use the $sign or commas in your answer. If the NPV is negative, use the -sign.

Other questions asked by students

Q

Cat Circulatory System Matching 1. superior vena cava in cats A. right common carotid artery 2. major branch off...

Medical Sciences
Q

Which of the following occurs in meiosis but not in mitosis? Select one: Chromosome replication Formation of Chiasmata Production...

Biology
Q

Question: Including the initial parent process, how many processes are created by the program? And what...

Programming
Q

^IT’s a two step question !* Step1 An economy’s AD (Aggregate Demand) function is Y = 1000...

Statistics
Q

Click through to page 5 1 Identify the following proteins that make up the cell...

Biology
Q

separation between the plates 6 A prism of refractive index u and refractin angle A...

Physics
Q

Pasadena Candle Inc budgeted production of 785 000 candles for January Each candle requires molding...

Geometry
Q

Solve sin(x)There are two solutions, A and B, with A

Calculus
Q

Use a calculator to evaluate the expression Round your answer to four decimal places 31...

Algebra
Q

11. (Equations with fractions/decimals) In college algebra, you will not only see equations with fractions,...

Algebra
Q

Some of the transactions of Bramble Company during August are listed below. Bramble uses the...

Accounting
Q

1.Identify two items or issues that cannot be derived from the financial statements of the...

Finance