What is the profitability index for this investment

Reference no: EM13126045

The Mejicano company is planning to purchase a piece of equipment that will reduce annual cash expenses over its 5-year useful life by equal amounts. The company will depreciate the equipment using a straight line method of depreciation based on estimated life of 5 years without any salvage value. The company is subject to a 40 percent tax. The marginal cost of capital for this acquisition is 11.50 percent. the financial analyst calculated that the internal rate of return based on the estimated after-tax calculated cash flows is 12.386 percent and a net present value of 10000. The president, however, wants to know the profitability index before he finally decides. What is the profitability index for this investment.

Reference no: EM13126045

Questions Cloud

Explain what is the ph : What is the pH of a 0.25 M NaOH solution? A Rolaids tablet contains calcium carbonate, which neutralizes stomach acid. If 44.55 mL of 0.488 M hydrochloric acid is required to neutralize one tablet, how many milligrams of calcium carbonate are in a ..

Differences between permutations and combinations : What are some similarities and differences between permutations and combinations? Give a real-life example of either a permutation or combination.

Local government was awarded a federal grant : The federal government provided the funds the following months. The local government would recognize revenues for the fiscal year ended June 30, 2009 in which amount?

Summarize how psychological disorders are classified : Create an 8- to 12-slide Microsoft® PowerPoint® presentation with speaker notes. Summarize how psychological disorders are classified. Include the role of the DSM -IV-TR®. Your presentation must have at least one slide for each major class of psyc..

What is the profitability index for this investment : The Mejicano company is planning to purchase a piece of equipment that will reduce annual cash expenses over its 5-year useful life by equal amounts.

Accumulated earnings tax problem : The accumulation was motivaated by his thinking that a depression was just around the corner. Tax savings did not enter his mind. Does the accumulated earnings tax apply to T corporation?

Even permutation : The group of even permutations of n symbols is denoted by A_n and is called the alternating group of degree n. Show that A_8 contains an element of order 15.

Define number of exhaled molecules : Number of exhaled molecules, Total mass of the atmosphere is equivalent to that in a layer 7 kilometer deep with density equal to the density at the surface

Set definitions with unions and intersections : Suppose you are going to flip a coin once. What is the set of possible outcomes for this? Suppose you are going to flip a coin twice. What is the set of possible outcomes for this?

User Account

All Pages