Compute the PI Statistic for Project Z and Advise the Firm

question 88

Multiple Choice

Compute the PI statistic for Project Z 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 10 percent.Project Z $$\begin{array} { | r | l | l | l | l | l | l | } \hline \text { Time } & 0 & 1 & 2 & 3 & 4 & 5 \\\hline \text { Cash Flow } & - \$ 1,000 & \$ 350 & \$ 380 & \$ 420 & \$ 300 & \$ 100 \\\hline\end{array}$$

• A)The project's PI is 8.48 percent and the project should be accepted.
• B)The project's PI is 8.48 percent and the project should be rejected.
• C)The project's PI is 16.48 percent and the project should be accepted.
• D)The project's PI is 21.48 percent and the project should be accepted.

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Definitions:

Section 11

In various contexts could refer to a specific provision of a legal document or statute; often requires specificity to the law or regulation being referenced.

Civil Action

A legal proceeding in which a plaintiff sues a defendant to resolve a non-criminal dispute.

Intrastate Offering Exemption

A legal exemption allowing securities to be sold within a single state without needing to register with the federal Securities and Exchange Commission.

Rule 147

A regulation under the U.S. Securities Act of 1933, facilitating companies to raise funds from investors within their state without registering the offer with the SEC.