Calculate profitability index to determine whether project

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Reference no: EM131927088

1. A project has an initial investment cost of $20 million. It has projected annual costs of $1 million for each of the first three years, and increasing by $400,000 each year thereafter. There is an additional maintenance cost of $3 million each fourth year (years 4, 8, and 12). The revenue is projected to start at $2 million in year one, increasing by $600,000 annually. Given the discount rate of 8% and a 15 year study period, calculate the Profitability index to determine whether the project is justified

a) 0.98 Justified

b) 0.94 Justified

c) 0.98 Not Justified

d) 0.94 Not Justified

2. Five Years Future Value What is the future value of $21,000 deposited for five years earning 10% interest rate annually?

$54,821

$33,821

$12,821

$21,000

Reference no: EM131927088

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