Financial accounting question A company is considering an investment project with aninitial cost of $5,000. The project promises a singlepayoff of $14,500 at the end of year 8. If the company'scost of capital is 15%, what is the profitability index (PI)of the project?

Step 1: DefinitionPresent Value of Future Cash Flow (PVCF):The present value of future cash flow…

Answered: A company is considering an investment…

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 5PA: Falkland, Inc., is considering the purchase of a patent that has a cost of $50,000 and an estimated...

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A company is considering an investment project with an initial cost of $5,000. The project promises a single payoff of $14,500 at the end of year 8. If the company's cost of capital is 15%, what is the profitability index (PI) of the project?