Kikwetu Limited is considering investing in a project with the following expected cashflows: Year (C.F)135,500239,000325,000415,000 The cost of the project = Sh. 100,000Required:Compute the approximate profitability index of the project if the discount rate is 10%a.4.6712b.1.9823c.-1.56d.0.9308

Profitability index is a methodology adopted in the capital budgeting techniques that helps in…

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Compute the approximate profitability index of the project if the discount rate is 10%

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 19EA: Redbird Company is considering a project with an initial investment of $265,000 in new equipment...

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Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

Kikwetu Limited is considering investing in a project with the following expected cashflows:

Year	(C.F)
1	35,500
2	39,000
3	25,000
4	15,000

The cost of the project = Sh. 100,000

Required:

Compute the approximate profitability index of the project if the discount rate is 10%

4.6712

1.9823

-1.56

0.9308

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