What is the profitability index

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Reference no: EM132060759

Xyz company is considering project where they expect 3.5 million in sales for the first year and they expect sales to grow 5% per year. The life of the project is three years.

The project will require 500,000.00 in working capital. They project the operating margin to be 4.5%. The company has a tax rate of 35% and a required rate of return of 8%.

The project will require 3 million in capital costs that will be salvaged for 15% at the end of the project. The company has interest expense of 150,000 annually.

What is the NPV?

What is the profitability index?

Reference no: EM132060759

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