Please Refer to the Following Data Concerning 4 Investment Alternatives

question 41

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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Which project has the highest profitability index?

• A) Project A
• B) Project B
• C) Project C
• D) Project D

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Definitions:

Indirect Expenses

Costs not directly linked to the production of goods or services, such as administrative and marketing expenses.

Subjective

Based on personal opinions, interpretations, points of view, or emotions rather than objective facts.

Cost of Goods Sold

The expenses directly related to the manufacturing of products sold by a business, including the costs associated with materials and labor.

Departmental Accounting

An accounting method that tracks the income, expenses, and profitability of individual departments within a company.