ABC Corporation Is Experiencing Hard Capital Rationing and Will Not

question 26

Essay

ABC Corporation is experiencing hard capital rationing and will not be able to invest more than $1,000,000 this year.Develop a profitability index for the following four projects and state what would be selected: All four projects will last three years and the firm uses a 10 percent discount rate.
$$\begin{array} { | c | c | c | } \hline \text { Project } & \text { Cost } & \text { Annual Inflows } \\\hline \text { A } & \$ 300,000 & \$ 130,000 \\\hline \text { B } & \$ 500,000 & \$ 220,000 \\\hline \text { C } & \$ 125,000 & \$ 60,000 \\\hline \text { D } & \$ 250,000 & \$ 100,000 \\\hline\end{array}$$

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Definitions:

Political Rights

Rights that allow individuals to participate in the political process, including voting, running for office, and engaging in political discourse.

Blacks

A term referring to individuals of Sub-Saharan African descent, often used within the context of discussions on race and ethnicity.

Sherman's Neckties

A term referring to the practice by Union General William Tecumseh Sherman during the American Civil War of destroying Confederate railroad tracks by heating and then bending them.

Railroad Ties

Heavy beams used as a base for railroad tracks to hold them in place and ensure the tracks remain aligned.