Emma is considering a new cat nip factory with the following cash flows,if the disoucnt rate is 7%,what is the PI?

Question

Quizplus · Accepted Answer

To calculate the PI, we need to find the present value of all the cash inflows and divide it by the initial investment. Using a financial calculator or excel function, we get a present value of $1,070.79 for all cash inflows and an initial investment of $1,000. Thus, the PI is 1.07079/1,000 = 1.067. This means that for every dollar invested, the project is expected to return $1.067 in present value terms. A PI greater than 1 indicates that the project is expected to generate positive net present value and is therefore a good investment.

Emma Is Considering a New Cat Nip Factory with the Following