What is the profitability index on investment

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Suppose you have developed the following information for a potential investment: current market value is $1,250,000; anticipated loan to value ratiois .80 with 2 points; and predicated cash flows of ATCF1 = $38,560, ATCF2 =$41,780, ATCF3 = $37,210, ATCF4 = $39,127, and ATER4 = $191,730. Further, assume the investor's minimum required after-tax rate of return on equity is 12%.

a. What is the internal rate of return on this potential investment?

b. What is the profitability index on this investment?

Reference no: EM132354597

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