What is the profitability index for the following set of cash flows if the relevant discount rate is 10%? What is the discount rate is 15%? If it is 22%? YEAR CASH FLOW 0 $-18,000 1 10,300 2 9,200 3 5,700 thank you! what is the profitability index for the following set of cash flows if the relevant discount rate is 10 percent? What if the discount rate is 15 percent? If it is 22 percent? Year 0 -$12,000. Year 1 $6200 Year 2 $5600 Year 3 $3900 The profitability index (PI) is used to evaluate an investment or rank various investments based on their profitability. It is a ratio of the present value of future income generated by investment 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? Answer to Year Cash Flow 0 -$17,300 1 9,600 2 8,500 3 5,000 What is the profitability index for the set of cash flows if the rele Question: Year Cash Flow 0) –$ 17,400 1) 9,700 2) 8,600 3) 5,100 What Is The Profitability Index For The Set Of Cash Flows If The Relevant Discount Rate Is 11 Percent? (Do Not Round Intermediate Calculations And Round Your Answer To 3 Decimal Places, E.g., 32.161.) Profitability Index What Is The Profitability Index For The Set Of Cash Flows If The Relevant
Capital budgeting, and investment appraisal, is the planning process used to determine Cash flows are discounted at the cost of capital to give the net present value Mutually exclusive projects are a set of projects from which at most one will be peer projects (e.g. - highest Profitability index to lowest Profitability index). Profitability index (PI) is another tool used in capital budgeting to measure the Present value for each cash flow is summarized in Table 18.18 and PI can be 700 (under the worst RS configuration) when the turnover increase is set at 2.5%. Future (competitiveness, forecasts, future cash flows) www.project-finance.com (E) Profitability Index Management may set a payback target, within an
The cash flows in this problem are an annuity, so the calculation is simpler. If the initial cost is $1,625, the payback period is: Payback = 2 + ($425 / $600) = 2.71 years There is a shortcut to calculate the payback period when the future cash flows are an annuity. Just divide the initial cost by the annual cash flow. -Project A: 29.11% -Project B: 26.40% -Project A: 14,732.20 -Project B: 14,686.80 Discount Rate = 14.83% An investment has an installed cost of $567,382. The cash flows over the four-year life of the investment are projected to be $196,584, $240,318, $188,674, and $156,313. What is the profitability index for the set of cash flows if the relevant discount rate is 21 percent? 11,100/1.21 + 10,000/1.21^2 + 6500/1.21^3 = 19673 19673/18800 = 1.05 (PI) Answer to Consider the following cash flows: Year Cash Flow 0 –$ 29,100 1 14,600 2 14,300 3 10,700 What is the profitability ind The profitability index is a technique used to measure a proposed project's costs and benefits by dividing the projected capital inflow by the investment.
Profitability index = PV of Free cash flow – PV of proposed investments [] three quarters of a set percentage of all the Government ordinary revenue collected Banking, Accounting, CFA Calculator & others. Here's the Profitability Index formula –. Profitability Index = PV of Future Cash Flows / Initial Investment 22 May 2019 differential cash flows of two projects equals the difference between the The following equation can be set up to work out incremental IRR:. Profitability index (PI) is the ratio of the present value of future cash inflows to 35,000 and that will generate cash flows with a present value of USD 275,000. Returns on projects should be measured based on cash flows generated It is usually set equal to Profitability Index (PI) = NPV/Initial Investment. □ In the At another level, the cash flows of the project could be affected by the inflation rate. This means that only one of a given set of projects can be taken (e.g. different sized The profitability index suggests that project A is superior to project B.
The profitability index, also known as the profit investment ratio, is calculated as the ratio of the present value of the future cash flows and the. 12 Feb 2020 Growing sustainable free cash flow and distributions BP is now set for a future that is different transition and profitability index as a measure. 19 Jul 2019 It is an index used to measure the present value of future cash flow compared to the initial investment. This measurement is more of a prediction The Profitability Index (PI) measures the ratio between the present value of future cash flows to the initial investment. The index is a useful tool for ranking investment projects and showing the value created per unit of investment. The Profitability Index is also known as the Profit Investment Ratio (PIR) or the Value Investment Ratio (VIR). find the value of all cash outflows at Time 0, and the value of all cash inflows at the end of the project. So, the value of the cash flows is: Time 0 cash flow = -$29,100 - $9,500 / 1.08^5 Time 0 cash flow = -$35,565.54 Time 5 cash flow = $11,300(1.08^4) + $14,000(1.08^3) + $15,900(1.08^2) + $13,000(1.08) Time 5 cash flow = $65,595.25