A Proposed Project Has an Initial Cost of $200,000 and Cash

question 42

Multiple Choice

A proposed project has an initial cost of $200,000 and cash flows of -$13,200,$124,500,and $187,900 for Years 1 to 3,respectively.Victoria,the boss,insists that only projects that can return at least $1.10 in today's dollars for every $1 invested can be accepted.She also insists on applying a discount rate of 14 percent to all cash flows.Based on these criteria,the project should be

• A)accepted because the PI is 0.89.
• B)rejected because the PI exceeds 1.
• C)accepted because the PI is 1.17.
• D)rejected because the PI is 1.06.
• E)rejected because the PI is 0.95.

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Definitions:

Expediting

The process of speeding up the production or delivery of goods to meet deadlines or emergency needs.

Ordering Costs

The expenses incurred from the procurement process, which may include supplier selection, purchase orders, and handling charges, aiming to manage supply chain efficiencies.

Carrying Costs

Expenses associated with holding inventory, including storage, insurance, and taxes.

Inventory Policy

Guidelines that govern how inventory is controlled and managed, including methods for ordering, storing, and using inventory.