An investor injects $ 40,000 in a new project. After investing an additional funds of $2000 in the first year, he receives a net benefit of $15000. In the second year the investment is $3000 and the net benefit amounts to $20,000. Following third and fourth year investments and benefits were 4,000 for a benefit of 19000 and 1,000 for a benefit of 16,000. Given that the discount rate is 12%, determine the profitability index.
An investor injects $ 40,000 in a new project. After investing an additional funds of $2000 in the first year, he receives a net benefit of $15000. In the second year the investment is $3000 and the net benefit amounts to $20,000. Following third and fourth year investments and benefits were 4,000 for a benefit of 19000 and 1,000 for a benefit of 16,000. Given that the discount rate is 12%, determine the profitability index.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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An investor injects $ 40,000 in a new project. After investing an additional funds of $2000 in the first year, he
receives a net benefit of $15000. In the second year the investment is $3000 and the net benefit amounts to
$20,000. Following third and fourth year investments and benefits were 4,000 for a benefit of 19000 and 1,000 for
a benefit of 16,000. Given that the discount rate is 12%, determine the profitability index.
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