An investor injects $ 40,000 in a new project. After investing an additional funds of $2000 in the first year, he receives a net benefit of $15000. In the second year the investment is $3000 and the net benefit amounts to $20,000. Following third and fourth year investments and benefits were 4,000 for a benefit of 19000 and 1,000 for a benefit of 16,000. Given that the discount rate is 12%, determine the profitability index.

An investor injects $ 40,000 in a new project. After investing an additional funds of $2000 in the first year, he receives a net benefit of $15000. In the second year the investment is $3000 and the net benefit amounts to $20,000. Following third and fourth year investments and benefits were 4,000 for a benefit of 19000 and 1,000 for a benefit of 16,000. Given that the discount rate is 12%, determine the profitability index.

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 16EA: Project B cost $5,000 and will generate after-tax net cash inflows of $500 in year one, $1,200 in...

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