Explore BrainMass

Explore BrainMass

    Calculating Profitability Index

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    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

    © BrainMass Inc. brainmass.com October 10, 2019, 12:44 am ad1c9bdddf

    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.