a profitability index (PI) of 1.45 indicates the project generates $0.45 of internal rate of return for every S100 invested plus is expected to earn therequired rate of return.true/ialse

Solution Concept Profitability index is mathematically expressed as =present value of inflow/…

Answered: a profitability index (PI) of 1.45…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Find the modified internal rate of return (MIRR) for a proposed project costing $12,513. Assume that the appropriate cost of capital for projects of this risk level, at this company is 10.96%, and the estimated cash flows for the life of the project are found in the table below. (If you calculate an MIRR of 20.22% , please enter 20.22- do not include the % symbol, and use at least two decimal places). Year 1 $7,261 Year 2 $4,832 Year 3 $9,441.2 Year 4 $13,000 Year 5 $12,638
A project has initial costs of $3,000 and subsequent cash inflows of $1350,275,875 and 1525 . The company's 10% cost of capital is an appropriate discount rate for this average risk project. Calculate the following: NPV IRR Profitability Index Please number/label each of your answers as shown above. Be sure to show your TVM function calculator inputs, and four decimal places.
Determine, using Capital Assets Pricing Model (CAPM), the Expected Rate of Return Risk free rate was 10% and Market return was 15% Asset D : return 14%, beta: 1.4
Consider the investment project with net cash flows shown. There are 2 rates of return for the project. One is 43.47%. What is the other? Enter as a percentage without the percent sign. For instance, if your answer is 10.23%, enter as 10.23. n Net Cash Flow 0 -$8000 1 $10000 2 $30000 3 -$40000
Which of the following comes closest to the net present value (NPV) of a project whose initial investment is $5 and which produces two cash flows: the first at the end of year 2 of $3 and the second at the end of year 4 of $7? The required rate of return is 13%? Select one: a. $1.84 b. $0 c. $1.64 d. $2.05 e. $2.26
If the profitability index of a project is 0.5, it means: O a. The NPV of the project is greater than zero O b. The project's cost is less than the present value of its cash flows O C. The NPV of the project is greater than 1 Od. The project returns 50 rupees in present value for each Rs 100 invested in it
Assume a project has cash flows of -$54,300, $18,200, $37,300, and $14,300 for Years 0 to 3, respectively. What is the profitability index given a required return of 12.6 percent? 1.02 .95 .98 1.06 ☐ 1.00
Dixon Sisters has a project with the after-tax cash flows shown below. The required return (cost of capital) on the investment is 10%. Compute the: Payback b. Discounted payback c. NPV d. Profitability index e. IRR MIRR YEAR 0 1 2 3 4 Cash flow −70,000 30,000 30,000 30,000 20,000
You are considering investing in a project with the following possible outcomes: Probability of Investment States Occurrence Returns State 1: Economic boom 18% 20% State 2: Economic growth 42% 16% State 3: Economic decline 30% 3% State 4: Depression 10% -25% Calculate the expected rate of return and standard deviation of returns for this investment, respectively. O 7.35%, 12.99% O2.18%, 1.69% O 8.72%, 12.99% O3.50%, 1.69%
True or False Assume that the riskfree rate of return is 5% p.a. and that an investment project costs $150,000 and is expected to generate a risky net cash flow next year of $180,000. The project is acceptable as its internal rate of return exceeds the riskfree rate of return.
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a profitability index (PI) of 1.45 ndcates the project generates S0.45 of internal rate of return for every S100 invested plus is expected to earn the required rate of return. true/false