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Question
Consider a project with the following cash flows:| After-Tax | After-Tax | |
| Accounting | Cash Flow | |
| Year | Profits | from Operations |
| 1 | $799 | $750 |
| 2 | $150 | $1,000 |
| 3 | $200 | $1,200 |
Initial outlay = $1,500
Terminal cash flow = 0
Compute the profitability index if the company's discount rate is 10%.
A) 15.8
B) 1.61
C) 1.81
D) 0.62
Answer
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