What Is the Profitability Index (PI)of a Project That Requires

question 126

Multiple Choice

What is the Profitability Index (PI) of a project that requires an initial investment of $36,000 and pays after-tax cash flows of $10,000 in year 1, $18,000 in year 2, $15,000 in year 3, and $12,000 in year 4? Assume the discount rate is 9%.

• A)1.05
• B)1.16
• C)1.23
• D)1.38

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Definitions:

Accounts Payable

Liabilities of a business that are owed to creditors for goods and services purchased on credit.

Net Income

The total profit of a company after all expenses, taxes, and costs have been subtracted from total revenues.