The following information is available about an investment opportunity: Initial Capital Expenditure $3 Million Annual Sales (in units) 100,000 Selling price per unit $50 Cost per unit $20 Project life 3 years Salvage value $0 Depreciation Straight line, over life of the project Tax rate 35% WACC 20% Initially the project requires an increase in net working capital of $600,000, but it will be recovered after the project’s life. Calculate profitability index (PI):
The following information is available about an investment opportunity:
Initial Capital Expenditure $3 Million
Annual Sales (in units) 100,000
Selling price per unit $50
Cost per unit $20
Project life 3 years
Salvage value $0
Tax rate 35%
WACC 20%
Initially the project requires an increase in net working capital of $600,000, but it will be recovered after the project’s life.
Calculate profitability index (PI):
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