Compute the PI Statistic for Project Q and Advise the Firm

question 85

Multiple Choice

Compute the PI statistic for Project Q and advise the firm whether to accept or reject the project with the cash flows shown as follows if the appropriate cost of capital is 12 percent. $$\begin{array} { l c c c c c c c } \text { Time } & 0 & 1 & 2 & 3 & 4 & 5 & \\\text { Cash Flow } & - \$ 1,000 & \$ 250 & \$ 180 & \$ 420 & \$ 300 & \$ 100\end{array}$$

• A)The project's PI is-8.70 percent and the project should be rejected.
• B)The project's PI is -11.70 percent and the project should be rejected.
• C)The project's PI is 3.70 percent and the project should be accepted.
• D)The project's PI is 5.70 percent and the project should be accepted.Step 1: Find NPV using financial calculator: NPV = -86.95;

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