What Is the Profitability Index for an Investment with the Following

question 51

Multiple Choice

What is the profitability index for an investment with the following cash flows given a 9% required return?
$\begin{array}{|l|l|}\hline \text { Year } & \text { Cash Flow } \\\hline 0 & -£ 21,500 \\\hline 1 & £ 7,400 \\\hline 2 & £ 9,800 \\\hline 3 & £ 8,900 \\\hline\end{array}$

• A).96
• B).98
• C)1.00
• D)1.02
• E)1.04

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Definitions:

Fixed Costs

Expenses that do not vary with the level of production or sales, such as rent, salaries, and insurance.

Variable Cost

Financial obligations that adjust directly based on the level of produced goods or services.

Peak-period Requirements

The heightened capacity and resource needs of a business or system during its busiest or most active times.

Equipment Services Department

A division within a company that is responsible for the maintenance, repair, and management of physical assets and equipment.