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

question 8

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:

Replacement Charts

Listings of current jobholders and people who are potential replacements if an opening occurs

Attrition

The gradual reduction in workforce through normal means, such as retirement or voluntary resignation, without actively replacing those positions.

Contract Workers

Individuals hired to perform specific tasks or projects for a limited period under a contract, rather than being permanent employees.

Full-time Employees

Employees who work a standard work week, typically defined by the employer, and often receive benefits such as health insurance.