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Calculating Profitability Index

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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 Cash Flow
0 -$12,000
1 6,200
2 5,600
3 3,900

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Help is given with calculating profitability index.

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At discount Rate of 10%
PV of initial cash outflow=12000
PV of future cash inflows =6200/(1+10%)+5600/(1+10%)^2+3900/(1+10%)^3=13194.59
PI =PV of cash ...

Solution provided by:
Lokesh Jain, MSc
Education
  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
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