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The Profitability Index (PI) formula is:
PI=Present Value of Cash FlowsInitial InvestmentPI = \dfrac{\text{Present Value of Cash Flows}}{\text{Initial Investment}}PI=Initial InvestmentPresent Value of Cash Flows
So,
Present Value of Cash Flows=PI×Initial Cost\text{Present Value of Cash Flows} = PI \times \text{Initial Cost}Present Value of Cash Flows=PI×Initial Cost =3.2×5,000=16,000= 3.2 \times 5,000 = 16,000=3.2×5,000=16,000
Therefore, the present value of cash flows is $16,000.
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