Based on the cost of the new lawn equipment to Dawntreader Landscaping and the weighted cost of capital, the profitability index will be 1.0216.
<h3>What is the project's profitability index?</h3>
The profitability index is a capital budgeting method that is used to decide if a project is financially viable.
It can be solved by the formula:
= Present value of cash inflows / Present value of cash outflows
The present value of the cash inflows is $178,783.91.
The present value of the cash outflow is the cost of $175,000.
The profitability index is therefore:
= $178,783.91 / $175,000
= 1,0216
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