A project requires an initial investment of $70,000 and has a project profitability index of 0.932. The present value of the future cash inflows from this investment is:
A)$70,000
B)$36,231
C)$135,240
D)Cannot be determined from the data provideD.Project profitability index = Net present value of the project ÷ Investment required

Question

Quizplus · Accepted Answer

Project profitability index (PPI) = Net present value (NPV) ÷ Investment required

PPI = 0.932

Investment required = $70,000

NPV = PPI x Investment required

NPV = 0.932 x $70,000

NPV = $65,240

The present value of the future cash inflows from this investment is equal to the net present value, which is $65,240. Therefore, the correct answer is (C) $135,240.

A Project Requires an Initial Investment of $70,000 and Has