NARRBEGIN: Gamma Electronics Gamma Electronics

question 46

Multiple Choice

NARRBEGIN: Gamma Electronics
Gamma Electronics
Gamma Electronics is considering the purchase of testing equipment that will cost $500,000 to replace old equipment.Assume the new machine will generate after-tax savings of $250,000 per year over the next four years.
-If Gamma Electronics has a 15% cost of capital,what's the profitability index of the investment?

• A) 1.4
• B) 0.4
• C) 2.0
• D) 1.0

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Definitions:

Lecture

An educational talk to an audience, particularly to students in a university or college, focusing on a particular subject or topic.

Spending

The act of using money to purchase goods or services, often considered in the context of personal, government, or business expenditures.

Income

The financial gain acquired by an individual or a business in exchange for providing labor, product, or service or through investing capital.

Economy

The system of production, distribution, and consumption of goods and services within a society, encompassing various sectors like agriculture, manufacturing, and services.