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Is the project with the highest profitability index also the one with the highest NPV ?h3. Which measure should you use to choose between the two projects? Profitability index (PI) is another tool used in capital budgeting to measure the For example, PI of 1.4 of a project tells us that for every dollar invested in the project, the average of hydrous and anhydrous ethanol prices remained close to the Alternative B. Install a new-type pump costing $3500 with working capital of  The following 2 mutually exclusive projects (Project A and Project B) are available to Okahandja Farm Enterprise. They are into poultry farming. The initial cash 

B) By setting the NPV equal to zero and solving for r , we find the IRR. 60 N/A . 15 B -73 30 30 30 30 .15 The profitability index for project A is closest to: A) 0.12   Profitability index (PI) is the ratio of the present value of future cash inflows to the initial investment. If a project has a PI greater than 1, you should invest in the project. The profitability index is closest to: 6.86. 7.86. 8.86. Answer: B. Let's put the numbers into the formula for the profitability index: PI=∑nt=0CFt(1+r)tI0. 23 Oct 2016 The profitability index helps make it possible to directly compare the NPV of one project to the NPV of another to find the project that offers the  BackBone, Inc. is considering two mutually exclusive projects, A and B. Project A costs $85,000 and is expected to generate $60,000 in year one and $75,000 in  A project's profitability index is equal to the ratio of the of a project's future cash flows to the project's . present value; initial cash outlay; net present value; initial  project? Why or why not? A. Net present value. B. Profitability index. C. Internal Note: The present values are rounded to the nearest dollar. Subtracting the  Is the project with the highest profitability index also the one with the highest NPV ?h3. Which measure should you use to choose between the two projects?

Profitability index (PI) is another tool used in capital budgeting to measure the For example, PI of 1.4 of a project tells us that for every dollar invested in the project, the average of hydrous and anhydrous ethanol prices remained close to the Alternative B. Install a new-type pump costing $3500 with working capital of 

The management of Cantell Corporation is considering a project that would require an initial investment of $47,000. No other cash outflows would be required. The present value of the cash inflows would be $55,930. The profitability index of the project is closest to: A) 1.19 B) 0.81 C) 0.19 D) 0.16 Profitability index = Prsenet value of future cash / initial investmenet required. Consider the following two projects: The profitability index for project A is closest to: 0.12 21.65 0.17 1.15. Consider the following two projects: Projec t Year 0 Cash Flow Year 1 Cash Flow Year 2 Cash Flow Year 3 Cash Flow Year 4 Cash Flow Discoun t Rate A - 100 40 50 60 N/A 0.15 B - 73 30 30 30 30 0.15 13) The net present value (NPV) of project A is closest to: A) 12.0 B) 12.6 C) 15.0 D) 42.9 Answer : A Explanatio n: A) NPV = - 100 + 40 / (1.15) 1 + 50 / The present value of the cash inflows would be $22,470 for Project W, $73,920 for Project X, and $98,800 for Project Y. 117. The profitability index of investment project X is closest to: Project X Investment required (a).. CFA Level 1 Exam Takeaways For Profitability Index. Profitability index (PI) is the ratio of the present value of future cash inflows to the initial investment. If a project has a PI greater than 1, you should invest in the project. If the PI is lower than 1, then the project is not profitable. The profitability index is the value we get for each invested unit of money.

12 Dec 2019 The profitability index rule is a decision-making exercise that helps evaluate whether to proceed with a project. The index itself is a calculation 

The appropriate discount rate for this project is 16%. 14) The profitability index for this project is closest to: A) .44. B) .26. C) 0.39. D) .34. Use the information for the question(s) below. Your firm is preparing to open a new retail strip mall and you have multiple businesses that would like lease space in it.

The present value of the cash inflows would be $22,470 for Project W, $73,920 for Project X, and $98,800 for Project Y. 117. The profitability index of investment project X is closest to: Project X Investment required (a)..

The management of Cantell Corporation is considering a project that would require an initial investment of $47,000. No other cash outflows would be required. The present value of the cash inflows would be $55,930. The profitability index of the project is closest to: A) 1.19 B) 0.81 C) 0.19 D) 0.16 Profitability index = Prsenet value of future cash / initial investmenet required. Consider the following two projects: The profitability index for project A is closest to: 0.12 21.65 0.17 1.15. Consider the following two projects: Projec t Year 0 Cash Flow Year 1 Cash Flow Year 2 Cash Flow Year 3 Cash Flow Year 4 Cash Flow Discoun t Rate A - 100 40 50 60 N/A 0.15 B - 73 30 30 30 30 0.15 13) The net present value (NPV) of project A is closest to: A) 12.0 B) 12.6 C) 15.0 D) 42.9 Answer : A Explanatio n: A) NPV = - 100 + 40 / (1.15) 1 + 50 / The present value of the cash inflows would be $22,470 for Project W, $73,920 for Project X, and $98,800 for Project Y. 117. The profitability index of investment project X is closest to: Project X Investment required (a)..

Profitability index (PI) is the ratio of the present value of future cash inflows to the initial investment. If a project has a PI greater than 1, you should invest in the project. The profitability index is closest to: 6.86. 7.86. 8.86. Answer: B. Let's put the numbers into the formula for the profitability index: PI=∑nt=0CFt(1+r)tI0.

Profitability index (PI), also known as profit investment ratio (PIR) and value investment ratio (VIR), is the ratio of payoff to investment of a proposed project. 75 Years as the Voice of Small Business. As small businesses grapple with Coronavirus, NFIB is dedicated to being their voice. We are continuing to track the  The Profitability Index (PI) measures the ratio between the present value of future cash flows and the initial investment. The index is a useful tool for ranking investment projects and showing the value created per unit of investment. The Profitability Index is also known as the Profit Investment Ratio (PIR) Assume the appropriate discount rate for this project is 14%. The profitability index for this project is closest to _____. The profitability index is a technique used to measure a proposed project's costs and benefits by dividing the projected capital inflow by the investment. Consider the following two projects: The profitability index for project B is closest to: 12.64 0.12 0.17 23.34. 1 Answer to Use the table for the question(s) below Consider the following two projects Project Year 0 Cash Flow Year 1 Cash Flow Year 2 Cash Flow Year 3 Cash Flo4 Year 4 Cash Flow Discount Rate A -100 40 50 60 N/A 0.15 B -73 30 30 30 30 0.15 The profitability index for project B is closest to: A. 12.64 B. 0.17

1) Assume the appropriate discount rate for this project is 15%. The payback period for this project is closest to: A) 3 B) 2.5 C) 2 D) 4 . 2) Assume the appropriate discount rate for this project is 15%. The IRR for this project is closest to: A) 21% B) 22% C) 15% D) 60% . Use the information for the question(s) below. Techniques of Capital Budgeting under Certainty Conditions. Profitability index for project B = 18665 / 20000 = 0.933. By referring to the table, we find that the discount factor closest to 3.733 for five years is 3.791 (10% of interest) and 3.696 (11% of interest). The actual value of internal rate of return would lie between 10% and 11%. 46. The management of Cantell Corporation is considering a project that would require an initial investment of $47,000. No other cash outflows would be required. The present value of the cash inflows would be $55,930. The profitability index of the project is closest to: A) 1.19. B) 0.81. C) 0.19. D) 0.16. Level: Easy LO: 2 Ans: C. 47. B. Project B is preferred over Project A according to the internal rate of return. C. Project C is preferred over Project A according to the project profitability index. D. Project A is preferred over Project C according to a net present value ranking.