Compute the PI Statistic for Project Q and Advise the Firm

question 110

Multiple Choice

Compute the PI statistic for Project Q and advise the firm whether to accept or reject the project with the cash flows shown as follows if the appropriate cost of capital is 12 percent.
Project Q
$$\begin{array} { l l l l c c c c } \text { Time } & 0 & 1 & 2 & 3 & 4 & 5 \\\text { Cash Flow } & - \$ 1,000 & \$ 250 & \$ 180 & \$ 420 & \$ 300 & \$ 100\end{array}$$

• A) The project's PI is ?8.70 percent and the project should be rejected.
• B) The project's PI is ?11.70 percent and the project should be rejected.
• C) The project's PI is 3.70 percent and the project should be accepted.
• D) The project's PI is 5.70 percent and the project should be accepted.

---

Definitions:

Perpetual Inventory

An inventory management system that records the sale or purchase of inventory immediately through the use of computerized systems.

Physical Inventory

A process of counting and valuing all the inventory that a business physically possesses at a particular point in time.

Computerization

The process of equipping tasks, processes, or systems with the capability to be performed or monitored by a computer.

Unit Prices

Unit prices are the costs assigned to a single unit of a product or service, allowing buyers to compare costs and make informed purchasing decisions.