The Following Information Is Provided by Kilmer Systems What Is the Profitability Index for Project C? (Round Your

question 5

Multiple Choice

The following information is provided by Kilmer Systems: $$\begin{array} { | l | r | r | r | r | } \hline & \text { Project A } & \text { Project B } & \text { Project C } & \text { Project D } \\\hline \text { Initial investment } & \$ 422,000 & \$ 206,000 & \$ 550,000 & \$ 500,000 \\\hline \text { PV of cash inflows } & \$ 580,000 & \$ 392,000 & \$ 814,000 & \$ 408,000 \\\hline \text { Payback period (years) } & 3.6 & 3.2 & 4.0 & 2.0 \\\hline \text { NPV of project } & \$ 158,000 & \$ 186,000 & \$ 264,000 & ( \$ 92,000 ) \\\hline\end{array}$$ What is the profitability index for Project C? (Round your answer to two decimal places.)

• A) 1.48
• B) 1.38
• C) 1.26
• D) 1.23

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Definitions:

Common Stock

A type of equity security that represents ownership in a corporation, providing voting rights and a share in the company's profits via dividends.

Dividends Per Share

The amount of dividends that a company declares to distribute for each share of its common stock.

Stock Dividend

A payment made to shareholders in the form of additional shares rather than cash, representing a portion of the profit.

Paid-In Capital

Paid-in capital is the amount of money that a company has received from shareholders in exchange for stock, reflecting the funding provided to the company over and above the par value of the shares.