Compute the PI statistic for Project Z and advise the firm whether to accept or reject the project with the cash flows shown below if the appropriate cost of capital is 10 percent. Project Z
A) The project's PI is 8.48% and the project should be accepted.
B) The project's PI is 8.48% and the project should be rejected.
C) The project's PI is 16.48% and the project should be accepted.
D) The project's PI is 21.48% and the project should be accepteD.Step 1: Find NPV using financial calculator: NPV = 214.78; Step 2: 214.78/1000 = 21.48% and since PI0 accept.

Question

Compute the PI statistic for Project Z and advise the firm whether to accept or reject the project with the cash flows shown below if the appropriate cost of capital is 10 percent. Project Z 
A) The project's PI is 8.48% and the project should be accepted. 
B) The project's PI is 8.48% and the project should be rejected. 
C) The project's PI is 16.48% and the project should be accepted. 
D) The project's PI is 21.48% and the project should be accepteD.Step 1: Find NPV using financial calculator: NPV = 214.78; Step 2: 214.78/1000 = 21.48% and since PI>0 accept.

Quizplus · Accepted Answer

Using a financial calculator, the NPV of the project is calculated to be 214.78. To find the PI, divide the NPV by the initial investment: 214.78/1000 = 0.21478 or 21.48%. Since the PI is greater than 0, the project should be accepted. Therefore, the best choice is D.

Compute the PI Statistic for Project Z and Advise the Firm