National Co. is planning to purchase a piece of equipment that will reduce annual cash expenses over its 5-year useful life by equal amounts. The company will depreciate the equipment using straight-line method of depreciation based on an estimated life of 5 years without any salvage value. The company is subject to 40% tax. The marginal cost of capital for this acquisition is 11.055%. The management accountant calculates, based on the estimated after-tax cash flows, that the internal rate of return is 12.386% and net present value of P10,000. The president, however, wants to know the profitability index before he finally decides. Use 5 decimal places for the present value factors What is the profitability index for this investment?
National Co. is planning to purchase a piece of equipment that will reduce annual cash expenses over its 5-year useful life by equal amounts. The company will depreciate the equipment using straight-line method of depreciation based on an estimated life of 5 years without any salvage value. The company is subject to 40% tax. The marginal cost of capital for this acquisition is 11.055%. The
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