Compute the PI statistic for Project Z and advise the firm whether to accept or reject the project with the cash flows shown as follows if the appropriate cost of capital is 10 percent. Project Z

A) The project's PI is 8.48 percent and the project should be accepted.
B) The project's PI is 8.48 percent and the project should be rejected.
C) The project's PI is 16.48 percent and the project should be accepted.
D) The project's PI is 21.48 percent and the project should be accepted.

Question

Compute the PI statistic for Project Z and advise the firm whether to accept or reject the project with the cash flows shown as follows if the appropriate cost of capital is 10 percent. Project Z

A) The project's PI is 8.48 percent and the project should be accepted. 
B) The project's PI is 8.48 percent and the project should be rejected. 
C) The project's PI is 16.48 percent and the project should be accepted. 
D) The project's PI is 21.48 percent and the project should be accepted.

Quizplus · Accepted Answer

Step 1: Find NPV using financial calculator: NPV = 214.78;
Step 2: 214.78/1,000 = 21.48 percent and since PI > 0 accept.

Compute the PI Statistic for Project Z and Advise the Firm