Determine the profitability index


A project requires a $100,000 investment and is expected to generate the following cash flows in the years after the investment is made:

Year Cash Flow
1 $20,000
2 40,000
3 60,000
4 30,000
5 10,000

Assuming the projects cost of capital is 10%, what is the profitability index?

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Finance Basics: Determine the profitability index
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