Berra, Inc

question 73

Multiple Choice

Berra, Inc. is currently considering an eight-year project that has an initial outlay or cost of $120,000. The future cash inflows from its project for years 1 through 8 are the same at $30,000. Berra has a discount rate of 11%. Because of capital rationing (shortage of funds for financing) , Berra wants to compute the profitability index (PI) for each project. What is the PI for Berra's current project?

• A) About 1.29
• B) About 1.31
• C) About 1.33
• D) About 1.39

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Definitions:

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