A Project Costs $12,000 and Has a Discount Rate of 15%.Calculate

question 73

Multiple Choice

A project costs $12,000 and has a discount rate of 15%.Calculate the profitability index of the project that has cash flows of $2,500 in years 1 and 2,and $4000 in years 3 and 4.

• A) 0.75
• B) 0.98
• C) 1.08
• D) 1.14
• E) 1.28

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Definitions:

Sole Proprietorship

A sole proprietorship is a form of business owned and run by one individual, where there is no legal distinction between the owner and the business.

Unlimited Liability

A legal structure in which owners are personally responsible for all of the company's debts and liabilities without limit.

Limited Liability

A legal structure where a company's owners are protected from personal liability for the company's debts or liabilities.