If the present value of future cash flows is $4,150 and the initial cost is $1,300, the profitability index (PI) is ____________?

Question

Accepted Answer

3.19 - The profitability index is calculated as: PI = Present Value of future cash flows &divide; Initial cost. So, PI = 4,150 &divide; 1,300 = 3.1923 &asymp; 3.19. A PI greater than 1 indicates the project adds value.

MCQ Detailed View

If the present value of future cash flows is $4,150 and the initial cost is $1,300, the profitability index (PI) is ____________?

Detailed Explanation

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MCQ Detailed View

If the present value of future cash flows is $4,150 and the initial cost is $1,300, the profitability index (PI) is ____________?

Detailed Explanation

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Discussion

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In cash flow analysis, two projects are compared using a common life approach, which is classified as…

In capital budgeting, the Internal Rate of Return (IRR) of a project is classified as its ____________?…

In evaluating independent projects, the results of Internal Rate of Return (IRR) and Net Present Value…