Profitability index computation

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Reference no: EM1342980

A four-year financial project has estimates of net cash flows shown below:

Year Net Cash Flow
1 $20,000
2 $25,000
3 $30,000
4 $35,000

It will cost $65,000 to implement the project, all of which must be invested in the beginning of the project. After the fourth year, the project will have no residual value.

Using the most likely estimates of cash flows, conducted a discounted cash flow assuming a 20% hurdle rate with no inflation. Using Excel or pencil and paper, what is the discounted profitability index of the project?

Reference no: EM1342980

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