# 8. Profitability Index A project has an initial cost of \$35,000, expected net cash inflows of \$9,000 per year for 6 years, and a cost of capital of 8%. What is the project’s PI? (Hint: Begin by constr

8. Profitability Index

A project has an initial cost of \$35,000, expected net cash inflows of \$9,000 per year for 6 years, and a cost of capital of 8%. What is the project’s PI? (Hint: Begin by constructing a time line.) Do not round intermediate calculations. Round your answer to two decimal places.

A project has an initial cost of \$60,000, expected net cash inflows of \$14,000 per year for 7 years, and a cost of capital of 13%. What is the project’s discounted payback period? (Hint: Begin by constructing a time line.) Do not round intermediate calculations. Round your answer to two decimal places.

13. Project Cash Flow

The financial staff of Cairn Communications has identified the following information for the first year of the roll-out of its new proposed service:Projected sales\$22 millionOperating costs (not including depreciation)\$9 millionDepreciation \$4 millionInterest expense \$3 millionThe company faces a 25% tax rate. What is the project’s operating cash flow for the first year (t = 1)? Enter your answer in dollars. For example, an answer of \$1.2 million should be entered as \$1,200,000. Round your answer to the nearest dollar.

Answer: \$  14. Net Salvage Value

Allen Air Lines must liquidate some equipment that is being replaced. The equipment originally cost \$10 million, of which 85% has been depreciated. The used equipment can be sold today for \$4 million, and its tax rate is 25%. What is the equipment’s after-tax net salvage value? Enter your answer in dollars. For example, an answer of \$1.2 million should be entered as 1,200,000. Round your answer to the nearest dollar. 