What is the profitability index of the investment

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Reference no: EM131890999

1. You are considering the purchase of an investment that would pay you $30 per year for Years 1-4, $78 per year for Years 5-7, and $68 per year for Years 8-10. If you require a 14 percent rate of return, and the cash flows occur at the end of each year, then how much should you be willing to pay for this investment? Show your answer to the nearest $.01. Do not use the $ sign in your answer.

2. You are offered an investment with returns of $ 1,184 in year 1, $ 3,447 in year 2, and $ 3,255 in year 3. The investment will cost you $ 6,017 today. If the appropriate Cost of Capital (quoted interest rate) is 11.9 %, what is the Profitability Index of the investment? Enter your answer to the nearest .01. Do not use the $ sign or commas in your answer. If the NPV is negative, use the - sign.

Reference no: EM131890999

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