The Following Information Is Available for a Potential Investment for Panda

question 94

Multiple Choice

The following information is available for a potential investment for Panda Company: $$\begin{array} { l r } \text { Initial investment } & \$ 95,000 \\\text { Net annual cash inflow } & 20,000 \\\text { Net present value } & 36,224 \\\text { Salvage value } & 10,000 \\\text { Useful life } & 10 \text { yrs. }\end{array}$$ The potential investment's profitability index is

• A)4.75.
• B)3.22.
• C)2.62.
• D)1.38.

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Definitions:

Operating Expense

Expenditures that a business incurs through its normal business operations.

Operating Profit

Earnings before interest and taxes (EBIT), representing the profit a business makes from its operations.

Selling Price

The amount for which a product or service is sold to the customer.

Unit Cost

The expenditure involved in generating, keeping, or obtaining one unit of a product or service.