Can someone please explain how to do these on a financial calculator? I have my

Question

Can someone please explain how to do these on a financial calculator? I have my final tomorrow.

Question 10 1 pts A new security system has a price-tag of $8,000, but should save your company $3,600 each year for the next 10 years in reduced thefts. What is the profitability index of the security system? Use a discount rate of 10.7%. O 2.51 0 2.42 2.79 2.68 2.33 Question 11 1 pts You have purchased a canning machine for $7,000. You expect the machine to save your company $3,775 each year for the next 10 years. What is the profitability index of the machine? Use a discount rate of 10.9%. 3.19 3.49 3.41 3.07 3.25

Explanation / Answer

Profitability Index=1+NPV/Initial Investment

1
NPV=-8000+3600/1.107+3600/1.107^2........3600/1.107^10=-8000+3600/0.107*(1-1/1.107^10)=13470.6
PI=1+13470.6/8000=2.683825

2
NPV=-7000+3775/1.109+3775/1.109^2........3775/1.109^10=-7000+3775/0.109*(1-1/1.109^10)=15325.38
PI=1+15325.38/7000=3.18934

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