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wrote...
Posts: 2784
2 years ago
The following information is provided by Dinovo Systems:

   Project A      Project B     Project C     Project D
Initial investment   $438,000   $218,000   $560,000   $516,000
PV of cash inflows   $582,000   $388,000   $800,000   $394,000
Payback period (years)   3.6   3.2   4.0   2.0
NPV of project   $144,000   $170,000   $240,000   $122,000

Calculate the profitability index for Project B. Show your calculations and round to two decimal places.
Textbook 
Horngren's Financial & Managerial Accounting, The Financial Chapters
Edition: 5th
Authors:
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wrote...
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Posts: 2547
2 years ago
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Profitability Index = Present value of net cash inflows / Initial investment = $388,000 / $218,000 = 1.78
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wrote...
2 years ago
This was certainly a tough question, loving the expertise
wrote...
2 years ago
Always happy to help a fellow business student Slight Smile
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