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If the required rate of return is 20%, is the project mentioned acceptable? Use NPV and then calculate profitability index
If the required rate of return is 20%, is the project mentioned acceptable? Use NPV and then calculate profitability index. Fill the table below and show your calculations. Net cash flow Cum Cash Flow Discounted Cash Flow 20% Year 0 Cash Cash In Out Flow Flow 0 900,000 400,000 100,000 500,000 100,000 600,000 50,000 600,000 0 1 2 3 4 NPV In cash flow Out cash flow PI
Expert Solution
| required rate | 20.0% | ||||||||
| Cash inflow | Cash outflow | Net cashflow | Cumulative Cashflow | Discounted cashflow | |||||
| Year0 | 0 | 900000 | -900000 | -900000 | -900000 | ||||
| Year1 | 400000 | 100000 | 300000 | -600000 | 250000 | ||||
| Year2 | 500000 | 100000 | 400000 | -200000 | 277777.8 | ||||
| Year3 | 600000 | 50000 | 550000 | 350000 | 318287.0 | ||||
| Year4 | 600000 | 0 | 600000 | 950000 | 289351.9 | ||||
| NPV | 235416.7 | SUM of all discounted cashflows | |||||||
| In cashflow | 1370833.33 | sum of discounted cashflows from Year1 to Year4 | |||||||
| Out cashflow | 900000.00 | ||||||||
| PI | 1.52 | In cashflow/Out cashflow |
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