A Project Costs $12,000 and Has a Discount Rate of 15%.Calculate

question 73

Multiple Choice

A project costs $12,000 and has a discount rate of 15%.Calculate the profitability index of the project that has cash flows of $2,500 in years 1 and 2,and $4000 in years 3 and 4.

• A) 0.75
• B) 0.98
• C) 1.08
• D) 1.14
• E) 1.28

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Definitions:

Monopoly

A market structure characterized by a single seller or company dominating the entire market, leading to limited competition.

Monopolistically Competitive

A market structure where many firms sell products that are similar but not identical, allowing for some degree of market power.

Product Differentiation

A strategy businesses use to distinguish their products from those of competitors, aiming to increase market share and customer loyalty.

Price Discrimination

A pricing strategy where a seller charges different prices for the same product or service to different customers, based on factors such as willingness to pay, location, or purchase volume.