If a Project Has a Cost of $50,000 and a Profitability

question 4

Multiple Choice

If a project has a cost of $50,000 and a profitability index of 0.4, then:

• A)its cash inflows are $70,000
• B)the present value of its cash inflows is $30,000
• C)its IRR is 20 percent
• D)its NPV is $20,000

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Definitions:

Cash Budget

A financial plan detailing a company's cash inflows and outflows over a specific period, used for managing cash flow and ensuring liquidity.

Budgeted Income Statement

A forecasted income statement showing projected revenues, expenses, and net income for a specific period.

Budgeted Balance Sheet

A financial statement projected for a future date, outlining the anticipated assets, liabilities, and equity based on planned operations and capital activities.

Budgeted Selling Price

The anticipated price at which a product is expected to be sold, as estimated during the budgeting process.