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Homework answers / question archive / The Mahan Corporation is considering an investment in a project that generates a profitability index of 1

The Mahan Corporation is considering an investment in a project that generates a profitability index of 1

Accounting

The Mahan Corporation is considering an investment in a project that generates a profitability index of 1.3. The present value of the cash inflows on the project is $44,000. What is the net present value of this project?

A. $10,154

  1. $13,200
  2. $57,200
  3. $33,846

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Answer:

A . $ 10,154

Step-by-Step explanation

Profitability Index = Present Value of Future Cash Flow/ Initial Investment.

1.3 = $44,000 / Initial Investment.

Initial Investment = $33,846.

NPV = $44,000 - $33,846 = $10,154.

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