A company is planning to expand its business is costing OMR 18189. The following cash inflows are expected. Calculate Profitability index given the rate of discounting to be 3.008% Years Machine A 1 13456 2 13300 3 12500 4 14500 Select one: a. 2.744 b. 2.766 c. none of the options

A company is planning to expand its business is costing OMR 18189. The following cash inflows are expected. Calculate Profitability index given the rate of discounting to be 3.008% Years Machine A 1 13456 2 13300 3 12500 4 14500 Select one: a. 2.744 b. 2.766 c. none of the options

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter7: Valuation Of Stocks And Corporations

Section: Chapter Questions

Problem 23SP

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Concept explainers

Present Value

Present value (PV) is defined as the current or present value of all future sums of cash flow or money at a specified rate of return. This rate of return is known as the discounted rate, which is essentially the interest rate, discounted over some time. The expected cash flows are discounted at a discount rate to compute the present value. The higher the discount rate, the higher the future value (FV), but the lower the present value.

Question

A company is planning to expand its business is costing OMR 18189. The following cash inflows are expected. Calculate Profitability index given the rate of discounting to be 3.008%

Years	Machine A
1	13456
2	13300
3	12500
4	14500

Select one:

a. 2.744

b. 2.766

c. none of the options

d. 31724.303

e. 0.364

Definition Definition Transfer of funds into a company by any third party, which may happen due to any operational, investing, and financing activities. The cash inflow includes payments made by customers or investments made by the investors into the company by purchasing its equity.

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