Answered: A6) Finance consider a project that…

A6) Finance consider a project that will cost $95,000 today and is projected to bring in $55,000 in year 1, $40,000 in year 2, and $20,000 in year 3. cost of capital is 10%. what is the projects PI?

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter12: Capital Budgeting: Decision Criteria

Section: Chapter Questions

Problem 1P: A project has an initial cost of 40,000, expected net cash inflows of 9,000 per year for 7 years,...

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Concept explainers

Present Value

Present value (PV) is defined as the current or present value of all future sums of cash flow or money at a specified rate of return. This rate of return is known as the discounted rate, which is essentially the interest rate, discounted over some time. The expected cash flows are discounted at a discount rate to compute the present value. The higher the discount rate, the higher the future value (FV), but the lower the present value.

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A6) Finance consider a project that will cost $95,000 today and is projected to bring in $55,000 in year 1, $40,000 in year 2, and $20,000 in year 3. cost of capital is 10%. what is the projects PI?

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