Rangiee Inc., is considering an investment in a new display fixtures for all its retail locations. For a typical store, the new fixtures will cost $9,000 immediately. The benefit of the new fixtures is enhanced sales, over the five-year life of the new fixtures – analysts estimate after-tax cash flows are expected to increase by $3,800 each of the five years. If the risk-adjusted discount rate for this type of project is 15.0%, what is the profitability index of this project (assume the yearly cash flows occur at year ends). Should the company invest?

 

Answer rating: 100% (QA)

To calculate the profitability index of the project we need to first calculate the present v... View the full answer