Dawntreader Landscaping is considering purchasing $175,000 of new lawn equipment and they anticipate the additional equipment will result in cash flows as below. Their weighted average cost of capital is 8.75%.

(Picture)

The profitability index for the project is:

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.

What is the project's profitability index?

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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Dawntreader Landscaping is considering purchasing $175,000 of new lawn equipment and they anticipate the additional equipment will result in cash flows as below. Their weighted average cost of capital is 8.75%. (Picture) The profitability index for the project is:

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What is the project's profitability index?

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Dawntreader Landscaping is considering purchasing $175,000 of new lawn equipment and they anticipate the additional equipment will result in cash flows as below. Their weighted average cost of capital is 8.75%.

(Picture)

The profitability index for the project is: