Based on the Profitability Index (PI) Rule, Should a Project $8 \%$

question 13

Multiple Choice

Based on the profitability index (PI) rule, should a project with the following cash flows be accepted if the discount rate is $8 \%$ ? Why or why not?

• A)yes; because the PI is 1.008
• B)yes; because the PI is .992
• C)yes; because the PI is .999
• D)no; because the PI is 1.008
• E)no; because the PI is .992

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Definitions:

FIFO Periodic

An inventory valuation method where the oldest inventory items are recorded as sold first, under a periodic system that updates inventory balances at the end of an accounting period.

Beginning Inventory

The value of a company's inventory at the start of an accounting period, carried over from the end of the prior period.

Sold Units

The number of units of a product or goods that have been sold during a specific period.

FIFO Perpetual

An inventory valuation method where the first goods purchased are the first ones sold, continuously updated for each sale and purchase.