Use the Table for the Question(s)below

question 2

Multiple Choice

Use the table for the question(s) below.
Consider a project with the following cash flows:

-Assume the appropriate discount rate for this project is 15%. The profitability index for this project is closest to:

• A)0.14
• B)0.22
• C)0.15
• D)0.60

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Definitions:

Commercial Substance

A situation where the future cash flows of a business are expected to change significantly as a result of a transaction.

Plant Assets

Long-term tangible assets used in the operation of a business that are not intended for sale.

Recognized Immediately

The principle of recording revenues or expenses in the accounting period when they occur, regardless of when cash is received or paid.

Asset Turnover

A financial ratio indicating how efficiently a company uses its assets to generate sales.