What is the profitability index for the set of cash flows if the relevant discou

Question

What is the profitability index for the set of cash flows if the relevant discount rate is 10 percent? (Do not round intermediate calculations and round your final answer to 3 decimal places, (e. g. , 32. 161)) What is the profitability index for the set of cash flows if the relevant discount rate is 15 percent? (Do not round intermediate calculations and round your final answer to 3 decimal places, (e. g. , 32. 161)) What is the profitability index for the set of cash flows if the relevant discount rate is 22 percent? (Do not round intermediate calculations and round your final answer to 3 decimal places, (e. g. , 32. 161))

Explanation / Answer

Hi, Please find the answer as follows: PV of Cash Inflows @ 10% = 10300/(1+.10) + 9200/(1+.10)^2 + 5700/(1+.10)^3 = 21249.44 PI = 21249.44/18000 = 1.181 PV of Cash Inflows @ 15% = 10300/(1+.15) + 9200/(1+.15)^2 + 5700/(1+.15)^3 = 19660.89 PI = 19660.89/18000 = 1.092 PV of Cash Inflows @ 22% = 10300/(1+.20) + 9200/(1+.20)^2 + 5700/(1+.20)^3 = 18270.83 PI = 18270.83/18000 = 1.015 Thanks

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