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blsea [12.9K]
2 years ago
9

Dawntreader Landscaping is considering purchasing $175,000 of new lawn equipment and they anticipate the additional equipment wi

ll result in cash flows as below. Their weighted average cost of capital is 8.75%.
(Picture)

The profitability index for the project is:

Business
1 answer:
Anna [14]2 years ago
5 0

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

Find out more on profitability index at brainly.com/question/28077968

#SPJ1

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