Compute the PI statistic for Project Q and advise the firm whether to accept or reject the project with the cash flows shown below if the appropriate cost of capital is 12 percent. Project Q
A) The project's PI is -8.70% and the project should be rejected.
B) The project's PI is -11.70% and the project should be rejected.
C) The project's PI is 3.70% and the project should be accepted.
D) The project's PI is 5.70% and the project should be accepteD.Step 1: Find NPV using financial calculator: NPV = -86.95; Step 2: -86.95/1000 = -8.70% and since PI

Question

Compute the PI statistic for Project Q and advise the firm whether to accept or reject the project with the cash flows shown below if the appropriate cost of capital is 12 percent. Project Q 
A) The project's PI is -8.70% and the project should be rejected. 
B) The project's PI is -11.70% and the project should be rejected. 
C) The project's PI is 3.70% and the project should be accepted. 
D) The project's PI is 5.70% and the project should be accepteD.Step 1: Find NPV using financial calculator: NPV = -86.95; Step 2: -86.95/1000 = -8.70% and since PI<0 reject.

Quizplus · Accepted Answer

The calculation shows that the project has a negative PI of -8.70%, which means that the project's cash outflows exceed its cash inflows. Therefore, the best choice is to reject the project.

Compute the PI Statistic for Project Q and Advise the Firm