What Is the Profitability Index of a Project That Has

question 75

Multiple Choice

What is the profitability index of a project that has an initial cash outflow of $600, an inflow of $250 for the next 3 years and a cost of capital of 10 percent?

• A) 0.667
• B) 2.036
• C) 1.036
• D) 2.739

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Definitions:

Average Total Costs

The total cost of production (including both fixed and variable costs) divided by the number of units produced, representing the average expense per unit.

Marginal Cost

The price associated with the creation of one more unit of a product or service.

Average Total Cost

The per-unit cost of production, calculated by dividing the total cost of production by the quantity of output produced.

Economic Profit

The difference between the total revenue generated by a business and the total costs, including both explicit and implicit costs.