Compute the PI Statistic for Project X and Note Whether

question 65

Multiple Choice

Compute the PI statistic for Project X and note whether the firm should accept or reject the project with the cash flows shown as follows if the appropriate cost of capital is 10 percent.
$$\begin{array}{l}\begin{array} {| l | l | l | l | l | l | l |}\hline\text {Time: }&0&1&2&3&4&5\\\hline\text {Cash flow:}&-250&75&0&100&75&50\\\hline\end{array}\end{array}$$

• A) ?0.0977 percent, reject
• B) ?9.77 percent, reject
• C) ?24.41 percent, reject
• D) 24.41 percent, accept

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Definitions:

Relevance

The degree to which something is related or useful to the matter at hand.

Scope

The extent or range of view, reach, application, effectiveness, or influence of an object, discussion, or analysis.

Range

The difference between the highest and lowest values in a set of numbers, indicating the spread or dispersion.

Theory

A system of ideas intended to explain something, based on general principles independent of the thing to be explained, often tested and grounded in evidence.