Use the Following Information for Questions
Selma Inc -Using the Profitability Index, How Many of the Projects Are

question 110

Multiple Choice

Use the following information for questions
Selma Inc. is comparing several alternative capital budgeting projects as shown below:
.. $\begin{array}{lrrr}&&\text { Projects }\\&A&B&C\\\text { Initial investment } & \$ 80,000 & \$ 120,000 & \$ 160,000 \\\text { Present value of net cash flows } & 90,000 & 110,000 & 200,000\end{array}$
-Using the profitability index, how many of the projects are acceptable?

• A) 3
• B) 2
• C) 1
• D) 0

---

Definitions:

After-Tax Lease Payment

The lease payment amount minus any tax savings resulting from deductible lease expenses.

Tax Rate

The rate at which a person or business is taxed on their earnings or profits.

Borrowed Funds

Money that is borrowed from banks or other lenders that must be repaid, often with interest, according to agreed upon terms.

CCA

Canadian Controlled Private Corporation, regarding taxation in Canada, or can refer to Capital Cost Allowance, which is a tax deduction in Canada that represents depreciation for tax purposes.