# Net present value and profitability index

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Calculate the net present value and profitability index of an uneven cash flow.

Investment A

Initial Investment is $180,325

Net cash flow

year 1 = $45,000

year 2 = $50,000

year 3 = $82,295

year 4 = $86,400

year 5 = $64,000

Investment B

Initial Investment is $150,960

Net cash flow

year 1 = $35,000

year 2 = $52,000

year 3 = $58,000

year 4 = $75,000

year 5 = $29,000

There is a 10% return on investment. Explain which investment I would like to consider and why.

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The solution explains the calculation of net present value and profitability index of an uneven cash flow based on the information given about investments. Step by step calculations are provided in the solution along with explanations.

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Problems: Calculate the net present value and profitability index of an uneven cash flow. There is a 10% return on investment. Explain which investment I would like to consider and why.

Solution:

NPV = PV of cash flows - initial ...

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