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12 April, 02:44

A project requires an initial investment of $60,000 and has a project profitability index of 0.329. The present value of the future cash inflows from this investment is:A. $79,740B. $45,147C. $60,000D. Cannot be determined with available data.

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  1. 12 April, 05:11
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    The present value of the future cash inflows from this investment is $19,740

    Explanation:

    Profitability Index is a useful tool for ranking project because we can know the amount / value created by per unit of investment.

    Profitability Index = Present value of future cash flow / Initial Investment

    ↔ 0.329 = Present value of future cash inflow / $60,000

    ↔ Present value of future cash inflow = 0.329 * $60,000 = $19,740
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