A 25- Year Project Has a Cost of $1,500,000 and Has

question 336

Multiple Choice

A 25- year project has a cost of $1,500,000 and has annual cash flows of $400,000 in years 1-15, and $200,000 in years 16-25. The company's required rate is 14%. Given this information, calculate
The profitability index of the project.

• A) 1.74
• B) 1.50
• C) 1.25
• D) 1.00
• E) 0.75

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Definitions:

The Classicals

A group of economists in the 18th and 19th centuries, including Adam Smith and David Ricardo, who developed theories about how economies function.

Price Level

The overall level of prices for goods and services in an economy at a specific point in time.

Aggregate Supply Curve

Curve showing the level of real GDP produced at different price levels during a time period, ceteris paribus.

Maximum Output Level

The highest quantity of a good or service that can be produced efficiently with available resources and technology.