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You have a project with the following cash flow stream


You have a project with the following cash flow stream (assume a 10% discount rate).  What is the profitability index of the project?  Is it acceptable?

Initial investment                                        ($76,000)

Year 1                                                           $20,000

Year 2                                                           $20,000

Year 3                                                           $20,000

Year 4                                                           $22,000

Year 5                                                           $32,000

Disinvestment                                        ($4,000) at Year 5

Part A: Calculate the profitability index for this project

Part B: Is the project favorable?  Why or why not?

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Financial Accounting: You have a project with the following cash flow stream
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