A project requires a net investment of $100,000. At the firm's cost of capital of 10%, the project's profitability index is 1.15. Determine the net present value of the project.
A) $15,000
B) $215,000
C) $115,000
D) none of the above/cannot be determined

Question

Quizplus · Accepted Answer

Solution:
PI = PV of NCF/NINV
1.15 = PV of NCF/$100,000
PV of NCF = $115,000
NPV = PV of NCF - NINV
= $115,000 - $100,000 = $15,000

A Project Requires a Net Investment of $100,000