Question

If the NPV (Net Present Value) of a shop is R195 000 and the profitability index is 1,24375, the initial investment in the shop is

[1] R86 908.

[2] R800 000.

[3] R195 000.

[4] R156 784.

[5] none of the above.

Answer 1

PI= (NPV+ out lay)/out lay

124375= (195000+ outlay)/outlay

124375outlay=195000+outlay

124375outlay-outlay= 195000

0,24375outlay= 195000

Outlay= 800,000

Therefore the option is [2] R800,000