What is the Profitability Index of the Boeing 787 Dreamliner project? The Boeing 787-8 can carry 230 passengers up to 8,200 nautical miles at a cruising speed of mach 0.85

The Dreamliner is more comfortable for passengers because of higher cabin humidity. Boeing completed construction its assembly plant in Everett Washington in December 2007 at a total cost of $7B. Boeing has secured sales of 865 aircraft over the period 2008-2012 for total proceeds of $138.4B ($160M per aircraft). The cost of building each plane is $140M. Assume that sales (and costs) occur in December of each year. Assume that sales are spread evenly across the five years from 2008-2012. The project cash flows are shown in the table, below. What is the Profitability Index of the project if Boeing's cost of capital is 10%? Calculate the index as of December 1, 2007. Ignore taxes.

Year Capital Investment Annual Sales Annual Revenues Annual Costs Cash Flows
2007 -$7,000M -$7,000
2008 173 $27,680 $24,220 $3,460
2009 173 $27,680 $24,220 $3,460
2010 173 $27,680 $24,220 $3,460
2011 173 $27,680 $24,220 $3,460
2012 173 $27,680 $24,220 $3,460

A) -1.52
B) -0.44
C) 1.06
D) 1.87
E) 2.43

D