1. Swimming Pool

Cost: $640,000 Expected life: 15 years

Currently the school rents a local facility for $60,000 per year. In addition, the school pays $10,000 per year to bus students to the facility. If the school owned its own pool, it could rent out pool time to local organizations for $30,000 per year. The headmaster feels that more students would use the pool if it were located on campus.

Cost: $640,000

Expected life: 15 years

(Potential)Savings: 60k+30k+10k=100k

Discount Factor =

1/ (1 + 0.12) 0 = 0.0000

1/ (1 + 0.12) 1 = 0.8928

1/ (1 + 0.12) 2 = 0.7972

1/ (1 + 0.12) 3 = 0.7118

1/ (1 + 0.12) 4 = 0.6355

1/ (1 + 0.12) 5 = 0.5674

1/ (1 + 0.12) 6 = 0.5066

1/ (1 + 0.12) 7 = 0.4523

1/ (1 + 0.12) 8 = 0.4038

1/ (1 + 0.12) 9 = 0.3606

1/ (1 + 0.12) 10 = 0.3219

1/ (1 + 0.12) 11 = 0.2874

1/ (1 + 0.12) 12 = 0.2566

1/ (1 + 0.12) 13 = 0.2291

1/ (1 + 0.12) 14 = 0.2046

1/ (1 + 0.12) 15 = 0.1826

=NPV 41086.45/

Initial Cost 640,000

PI=.0642

Okay this looks wrong.

what Is the Profitability index