Consider the following cash flows: Year Cash Flow 0 −$29,700 1 14,000 2 14,900 3 11,300 a

Finance Aug 09, 2020

Consider the following cash flows:

Year Cash Flow

0 −$29,700

1 14,000

2 14,900

3 11,300

a. What is the profitability index for the cash flows if the relevant discount rate is 12 percent? (Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161.)

b. What is the profitability index if the discount rate is 17 percent? (Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161.) c.What is the profitability index if the discount rate is 24 percent? (Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161.)

Expert Solution

a). Profitability index if the discount rate is 12% = 1.092

b). Profitability index if the discount rate is 17% = 1.007

c). Profitability index if the discount rate is 24% = 0.906

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