Given the Following Information and Assuming a CCA Rate of 20

question 279

Multiple Choice

Given the following information and assuming a CCA rate of 20%, what is the profitability index of this project? Initial investment = $400,000; life = five years; before-tax cost savings = $150,000 per
Year; salvage value = $30,000 in year 5; tax rate = 34%; discount rate = 14%.

• A) 0.45
• B) 0.74
• C) 1.07
• D) 1.65
• E) 1.98

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Definitions:

Rationalization

In psychoanalytic theory, the defense mechanism that produces a seemingly logical rationale for an impulse or thought that otherwise would cause anxiety.

Defense Mechanism

Psychological strategies used unconsciously to protect oneself from anxiety arising from unacceptable thoughts or feelings.

Psychosexual Stages

A Freudian theory describing how personality develops through five stages from infancy to adulthood, centered on sexual pleasure from specific body areas.

Phallic Stage

A phase in Freudian psychosexual development, occurring roughly between the ages of three and six, where the libido's focus is on the genital organs.