Calculate the profitability index for the cash flows provided in the t

Calculate the profitability index for the cash flows provided in the table below.

Note: The negative cash flow for year 0 is the initial investment for the project. Assume a required rate of return of 9.00%
Year Cash Flow
0 -$90,000
1 $32,000
2 $32,000
3 $32,000

A) 0.85
B) 0.90
C) 1.00
D) 1.11

ANSWER

B
Explanation: B) Via Calculator: N = 3, I = 9, PMT = 32,000, FV = 0, PV = $81,001.43, PI = PV/Initial investment = $81,001.43/$90,000 = 0.90.