The Following Information Is Available for a Potential Investment for Panda

question 58

Multiple Choice

The following information is available for a potential investment for Panda Company: $$\begin{array} { l l } \text { Initial investment } & \$ 40,000 \\\text { Net annual cash inflow } & 10,000 \\\text { Net present value } & 18,112 \\\text { Salvage value } & 5,000 \\\text { Useful life } & 10 \text { yrs. }\end{array}$$ The potential investment's profitability index is

• A)4.00.
• B)2.85.
• C)2.50.
• D)1.45.

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Definitions:

Direct Labor Costs

Expenses related to the payment of wages for employees directly involved in producing goods or providing services.

Manufacturing Overhead Costs

Indirect expenses related to the production process, such as utilities, depreciation, and salaries for factory support staff.

Return on Investment

A measure used to evaluate the efficiency or profitability of an investment, calculated by dividing the benefit (return) of an investment by the cost of the investment.

Investment Center

A business unit within an organization that is responsible for its own revenues, expenses, and investments, and is evaluated on its return on investment.