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I only have enough credit for one more question. I am aware that the rule states you only need to solve a limit of 5
I only have enough credit for one more question. I am aware that the rule states you only need to solve a limit of 5 answers. However, in this case there are people who are willing to help answer all of them. If you are one of them, please kindly help me answer all of these questions.
Please don't just answer the first question or the five questions, otherwise I'll hit the dislike button. Thank you
Estimating the cash flow generated by $1 invested in investment The profitability index (PI)is a capital budgeting tool that provides another way to compare a project's benefits and costs. It is computed as a ratio of the discounted value of the net cash flows expected to be generated by a project over its life (the project's expected benefits) to its net cost (NINV). A project's PI value can be interpreted to indicate a project's discounted return generated by each dollar of net investment required to generate those returns. Consider the case of Free Spirit Industries Inc.: Free Spirit Industries Inc. is considering investing $400,000 in a project that is expected to generate the following net cash flows: Year Cash Flow Year 1 $275,000 Year 2 $500,000 Year 3 $425,000 Year 4 $425,000 Free Spirituses a WACC of 10% when evaluating proposed capital budgeting projects. Based on these cash flows, determine this project's PI (rounded to four decimal places): O 3.3411 O 2.7047 O 2.5456 O 3.1820 Free Spirit's decision to accept or reject this project is independent of its decisions on other projects. Based on the project's PI, the firm should the project. By comparison, the net present value (NPV) of this project is criterion, Free Spirit should in the project because the project . On the basis of this evaluation increase the firm's value. When a project has a PI greater than 1.00, it will exhibit an NPV ; when it has a PI of 1.00, it will have an NPV equal to $0. Projects with PIS 1.00 will exhibit negative NPVs
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