Use the Table for the Question(s)below

question 11

Multiple Choice

Use the table for the question(s) below.
Consider a project with the following cash flows in $:
-Assume the appropriate discount rate for this project is 15%.The profitability index for this project is closest to:

• A).14.
• B).22.
• C).60.
• D).15.

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Definitions:

Diminishing Returns

A principle stating that as investment in a particular area increases, the rate of profit from that investment, after a certain point, cannot continue to increase if other variables remain constant.

Marginal Benefit

The additional satisfaction or utility derived by consuming or producing one more unit of a good or service.

Public Good

An item or service made available at no cost to everyone in society, delivered by public institutions, private organizations, or individuals without aiming for financial gain.

Marginal Cost

The cost of producing one additional unit of a good or service, a concept crucial for understanding economic decision-making and pricing strategies.