Compute the PI Statistic for Project Z and Advise the Firm

question 92

Multiple Choice

Compute the PI statistic for Project Z 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 10 percent.
Project Z
$$\begin{array} { l l l l c c c c } \text { Time } & 0 & 1 & 2 & 3 & 4 & 5 \\\text { Cash Flow } & - \$ 1,000 & \$ 350 & \$ 380 & \$ 420 & \$ 300 & \$ 100\end{array}$$

• A) The project's PI is 8.48 percent and the project should be accepted.
• B) The project's PI is 8.48 percent and the project should be rejected.
• C) The project's PI is 16.48 percent and the project should be accepted.
• D) The project's PI is 21.48 percent and the project should be accepted.

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Definitions:

Physiological State

The condition of normal function of an organism at any given time, encompassing various physical and chemical processes.

Lysergic Acid Diethylamide (LSD)

A potent psychedelic drug known for altering perception, mood, and thoughts, often producing visual hallucinations.

Ecstasy

An overwhelming feeling of great happiness or joyful excitement.

Crack

A potent form of cocaine that is smoked and has a rapid, intense, and short-lived high, often associated with severe addiction and social problems.