The formula for Profitability Index (PI) is:
PI=Present Value of Cash FlowsInitial CostPI = \frac{\text{Present Value of Cash Flows}}{\text{Initial Cost}}PI=Initial CostPresent Value of Cash Flows
So,
PV=PI×Initial CostPV = PI \times \text{Initial Cost}PV=PI×Initial Cost PV=5.6×6,000=33,600PV = 5.6 \times 6,000 = 33,600PV=5.6×6,000=33,600
Therefore, the present value of cash flows is 33,600....
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The formula for Profitability Index (PI) is:
PI=Present Value of Cash FlowsInitial CostPI = \frac{\text{Present Value of Cash Flows}}{\text{Initial Cost}}PI=Initial CostPresent Value of Cash Flows
So,
PV=PI×Initial CostPV = PI \times \text{Initial Cost}PV=PI×Initial Cost PV=5.6×6,000=33,600PV = 5.6 \times 6,000 = 33,600PV=5.6×6,000=33,600
Therefore, the present value of cash flows is 33,600.
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