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What is the profitability index of this project

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Reference no: EM132825159

Question - Rangiee Inc., is considering an investment in a new display fixtures for all its retail locations. For a typical store, the new fixtures will cost $10,000 immediately. The benefit of the new fixtures is enhanced sales, over the five-year life of the new fixtures - analysts estimate after-tax cash flows are expected to increase by $3,500 each of the five years.

If the risk-adjusted discount rate for this type of project is 8.0%, what is the profitability index of this project (assume the yearly cash flows occur at year ends). Should the company invest?

Reference no: EM132825159

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