Profitability index. Given the discount rate and the future cash flow of each project listed in the following table, use the PI to determine which projects the company should accept. What is the PI of project B?(Round to two decimal places.) Cash Flow Project A Project B Year 0 −$1,800,000 −$2,400,000 Year 1 $500,000 $1,200,000 Year 2 $600,000 $1,100,000 Year 3 $700,000 $1,000,000 Year 4 $800,000 $900,000 Year 5 $900,000 $800,000 Discount rate 5% 17%
Profitability index. Given the discount rate and the future cash flow of each project listed in the following table, use the PI to determine which projects the company should accept. What is the PI of project B?(Round to two decimal places.) Cash Flow Project A Project B Year 0 −$1,800,000 −$2,400,000 Year 1 $500,000 $1,200,000 Year 2 $600,000 $1,100,000 Year 3 $700,000 $1,000,000 Year 4 $800,000 $900,000 Year 5 $900,000 $800,000 Discount rate 5% 17%
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Profitability
index.
Given the discount rate and the future cash flow of each project listed in the following table, use the PI to determine which projects the company should accept.
What is the PI of project B?(Round to two decimal places.)
|
Cash Flow
|
Project A
|
Project B
|
|
|
|
Year 0
|
−$1,800,000
|
|
−$2,400,000
|
|
|
Year 1
|
$500,000
|
|
$1,200,000
|
|
|
Year 2
|
$600,000
|
|
$1,100,000
|
|
|
Year 3
|
$700,000
|
|
$1,000,000
|
|
|
Year 4
|
$800,000
|
|
$900,000
|
|
|
Year 5
|
$900,000
|
|
$800,000
|
|
|
Discount rate
|
5%
|
17%
|
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