A Firm Is Reviewing a Project That Has an Initial

question 35

Multiple Choice

A firm is reviewing a project that has an initial cost of $67,000.The project will produce annual cash inflows, starting with Year 1, of $8,000, $13,400, $18,600, $24,100, and finally in Year 5, $37,900.What is the profitability index if the discount rate is 11 percent?

• A).92
• B).98
• C)1.02
• D)1.05
• E)1.09

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Definitions:

Revenue Functions

Mathematical models that describe how a company's revenue is related to the selling price of its products and the quantity of products sold.

Expense E

This is not a standard financial term and more context is needed for a specific definition. NO.

Fixed Expenses

Costs that do not change in amount and are required to be paid on a regular basis, such as rent, insurance premiums, and loan payments.

Demand Function

A mathematical representation of the relationship between the quantity demanded of a good and its price, along with other factors.