Homework #6D (Profitability Index)
This set of problems is designed to be calculated using the Excel or financial calculator. Do not use financial tables to calculate these problems.
Question 3 (1 point)
Good Morning Food, Inc. is using the profitability index (PI) when evaluating projects. You have to find the PI for the company’s project, assuming the company’s cost of capital is 9.94 percent. The initial outlay for the project is $367,894. The project will produce the following end-of-the-year after-tax cash inflows of
Year 1: $154,295
Year 2: $158,527
Year 3: $278,701
Year 4: $477,681
Round the answer to two decimal places.