Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Question
100%
Year
0
1
2
3
Cash Flow
-$ 18,400
10,700
9,600
6,100
a. What is the profitability index for the set of cash flows if the relevant discount rate is 11
percent? (Do not round intermediate calculations and round your answer to 3
decimal places, e.g., 32.161.)
b. What is the profitability index for the set of cash flows if the relevant discount rate is 16
percent? (Do not round intermediate calculations and round your answer to 3
decimal places, e.g., 32.161.)
c. What is the profitability index for the set of cash flows if the relevant discount rate is
23 percent? (Do not round intermediate calculations and round your answer to 3
decimal places, e.g., 32.161.)
a. Profitability index
b. Profitability index
c. Profitability index
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Transcribed Image Text:Year 0 1 2 3 Cash Flow -$ 18,400 10,700 9,600 6,100 a. What is the profitability index for the set of cash flows if the relevant discount rate is 11 percent? (Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161.) b. What is the profitability index for the set of cash flows if the relevant discount rate is 16 percent? (Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161.) c. What is the profitability index for the set of cash flows if the relevant discount rate is 23 percent? (Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161.) a. Profitability index b. Profitability index c. Profitability index
Expert Solution
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Step 1

Profitability index is the capital budgeting method for calculating the ratio of present value of cash inflows and present value of cash outflows.

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