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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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    https://brainmass.com/economics/finance/calculating-profitability-index-304770

    Solution Preview

    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 Summary

    Help is given with calculating profitability index.

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