what is pi for a project with an initial investment cash out

what is pi for a project with an initial investment cash output of $30 and subsequent cash inflows of $80 in 1 year and $20 in year 2 if the discounted rate is 12%

Solution

Present value of inflows=cash inflow*Present value of discounting factor(rate%,time period)

=80/1.12+20/1.12^2

which is equal to

=$87.37(Approx)

PI=Present value of inflows/Present value of outflows

=$87.37/$30

which is equal to

=2.91(Approx).