Consider a project with the following information:
Year After-tax After-tax Cash Flow
Accounting Profits operations
1 $799 $750
2 150 1,000
3 200 1,200

Consider a project with the following information:

Initial outlay = $1,500

Compute the profitability index if the company's discount rate is 10%.

Answer rating: 100% (QA)

To compute the profitability index we need to calculate the present value of the cash flows and then divide it by the initial outlay Given Year 1 aftertax cash flow ... View the full answer