Nodak,IncIs Currently Considering an Eight-Year Project That Has an Initial

question 35

Multiple Choice

Nodak,Inc.is currently considering an eight-year project that has an initial outlay or cost of $160,000.The cash inflows from its project for years 1 through 5 are the same at $55,000.Nodak has a discount rate of 11%.Because there is a shortage of funds to finance all good projects,Nodak wants to compute the profitability index (PI) for each project.That way Nodak can get an idea as to which project might be a better choice.What is the PI for Nodak's current project?

• A)About 1.27
• B)About 1.24
• C)About 1.19
• D)About 1.09

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Definitions:

Potential Crises

Refers to situations or events that have the capacity to lead to an emergency or a critical condition, requiring immediate attention to prevent or mitigate disaster.

Unforeseeable

Impossible to predict or anticipate due to lack of information or inherent unpredictability.

Satisficing

A decision-making strategy that aims for a satisfactory or adequate result, rather than the optimal solution, due to limitations in time, resources, or information.

Optimal

describes the most advantageous condition or level of efficiency that can be achieved under specific circumstances.