What Is the Profitability Index for an Investment with the Following

question 7

Multiple Choice

What is the profitability index for an investment with the following cash flows given a 14.5 percent required return?

• A)0.94
• B)0.98
• C)1.02
• D)1.06
• E)1.11

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Definitions:

Short Run

The short run in economics is a time period during which at least one input, such as plant size, is fixed and cannot be changed by the firm.

Fixed Plant Capacity

The maximum output level that a plant can achieve with the current facilities and resources over a specific period.

Industry Entry

The act or process of beginning to compete in a new or existing market as a new participant.

Nonlabor Resources

Assets or materials used in production that do not involve human labor, such as machinery, raw materials, and buildings.