Please Refer to the Following Data Concerning 4 Investment Alternatives

question 59

Multiple Choice

Please refer to the following data concerning 4 investment alternatives:
$\begin{array}{|l|r|r|r|r}\hline & \text { Praject A } & { \text { Praject B } } & { \text { Praject C } } & { \text { Praject D } } \\ \hline \text { Initial investment } & \$ 210,000 & \$ 400,000 & \$ 550,000 & \$ 1,000,000 \\\hline \text { PV of cash } \\\text { Inflows } & \$ 285,000 & \$ 490,000 & \$ 800,000 & \$ 990,000 \\\hline \text { Payback period } & \\\text { (years) } & 7.2 & 6.0 & 9.5 & 2.0 \\\hline \text { NPV of project } & \$ 75,000 & \$ 90,000 & \$ 250,000 & (\$ 10,000 \\\hline\end{array}$


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What is the profitability index for Project B?

• A) 1.98
• B) 1.38
• C) 1.26
• D) 1.23

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