Use the Table for the Question(s) Below -The Profitability Index for Project B Is Closest To?
A)

question 78

Multiple Choice

Use the table for the question(s) below.
Consider the following two projects:
$\begin{array} { l c c c c c c } \hline \text { Project } & \begin{array} { c } \text { Year 0 } \\\text { Cash Flow }\end{array} & \begin{array} { c } \text { Year 1 } \\\text { Cash Flow }\end{array} & \begin{array} { c } \text { Year 2 } \\\text { Cash Flow }\end{array} & \begin{array} { c } \text { Year 3 } \\\text { Cash Flow }\end{array} & \begin{array} { c } \text { Year 4 } \\\text { Cash Flow }\end{array} & \begin{array} { c } \text { Discount } \\\text { Rate }\end{array} \\\hline \mathrm { A } & - 100 & 40 & 50 & 60 & \text { N/A } & 0.15 \\\hline \mathrm { B } & - 73 & 30 & 30 & 30 & 30 & 0.15 \\\hline\end{array}$
-The profitability index for project B is closest to?

• A) 0.17
• B) 0.12
• C) 23.34
• D) 12.64

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Definitions:

Depreciation

Systematically spreading the expense of a tangible asset across its life expectancy.

Asset Cost

The initial expense to acquire an asset, including purchase price and any additional costs necessary to get the asset ready for its intended use.

Useful Life

The expected period of time during which an asset is useful to the owning entity and contributes to its cash flows.

Prepaid Rent

It represents payments made for rent before the rental period has occurred, classified as a current asset on the balance sheet.