Homework SourseA project has an initial cost of 70900 expected net cash inf
A project has an initial cost of $70,900, expected net cash inflows of $11,000 per year for 8 years, and a cost of capital of 8%. What is the project\'s PI? Do not round your intermediate calculations. Round your answer to two decimal places.
Solution
PI = 1 - 7686.97/70,900 = 0.89
| Discount rate | 8.0000% | ||
| Cash flows | Year | Discounted CF= cash flows/(1+rate)^year | Cumulative cash flow |
| (70,900.000) | 0 | (70,900.00) | (70,900.00) |
| 11,000.000 | 1 | 10,185.19 | (60,714.81) |
| 11,000.000 | 2 | 9,430.73 | (51,284.09) |
| 11,000.000 | 3 | 8,732.15 | (42,551.93) |
| 11,000.000 | 4 | 8,085.33 | (34,466.60) |
| 11,000.000 | 5 | 7,486.42 | (26,980.19) |
| 11,000.000 | 6 | 6,931.87 | (20,048.32) |
| 11,000.000 | 7 | 6,418.39 | (13,629.93) |
| 11,000.000 | 8 | 5,942.96 | (7,686.97) |
