Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

The LSUS Corporation has a project costing $ 4 0 , 0 0 0 and cash flows of $ 8 , 5 0 0 ,

The LSUS Corporation has a project costing $40,000 and cash flows of $8,500,$15,600, and $22,700 for Years 1 to 3, respectively. Based on the profitability index rule, should the project be accepted if the discount rate is 9.5 percent? Why or why not? (Hint: to compute PI, you need to use the CF functions and intentionally define the CF0 as zero on your financial calculator, so that you will not double count the initial cash outflow)
a. Yes; because the PI is negative
b. Yes; because the ?PI is 1.03
c. No; because the ?PI is 0.95
d. No; because the ?PI is 1.03
image text in transcribed

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Students also viewed these Finance questions