Homework SoursePlease show all work What is the profitability index for the
Please show all work.
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 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 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 answer to 3 decimal places, e.g., 32.161.)
| Year | Cash Flow | ||
| 0 | –$ | 18,300 | |
| 1 | 10,600 | ||
| 2 | 9,500 | ||
| 3 | 6,000 | ||
Solution
Profitability Index = Total Cash Inflow
Total Cash Outflow
| Year | Cash Flows | Discount Rate @10% | Cash Flows |
| 0 | -18300 | 1 | |
| 1 | 10600 | 0.909 | 9,635.40 |
| 2 | 9500 | 0.826 | 7,847.00 |
| 3 | 6000 | 0.751 | 4,506.00 |
| 21,988.40 | |||
| Cash Outflow | 18,300.00 | ||
| Profitability Index | 1.20 |
