A Firm Is Reviewing a Project That Has an Initial

question 35

Multiple Choice

A firm is reviewing a project that has an initial cost of $67,000.The project will produce annual cash inflows, starting with Year 1, of $8,000, $13,400, $18,600, $24,100, and finally in Year 5, $37,900.What is the profitability index if the discount rate is 11 percent?

• A).92
• B).98
• C)1.02
• D)1.05
• E)1.09

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Definitions:

Total Liabilities

The sum of all financial obligations a company owes to outside parties.

Expenses

Costs incurred by a business in the process of earning revenue, including operational costs, salaries, and utilities.

Retained Earnings

Part of a company's profit that is held or retained and saved for future use, reinvestment, or to pay debt rather than being paid out as dividends to shareholders.

Common Stock

A type of security that represents ownership in a corporation, entitling the holder to vote on corporate matters and receive dividends.