The Following Information Is Provided by Graham Company Which Project Has the Highest Profitability Index?
A)Project a
B)Project

question 19

Multiple Choice

The following information is provided by Graham Company: $$\begin{array} { | l | r | r | r | r | } \hline & \text { Project A } & \text { Project B } & \text { Project C } & \text { Project D } \\\hline \text { Initial investment } & \$ 434,000 & \$ 200,000 & \$ 568,000 & \$ 510,000 \\\hline \text { PV of cash inflows } & \$ 572,000 & \$ 396,000 & \$ 808,000 & \$ 402,000 \\\hline \text { Payback period (years) } & 3.6 & 3.2 & 4.0 & 2.0 \\\hline \text { NPV of project } & \$ 138,000 & \$ 196,000 & \$ 240,000 & ( \$ 108,000 \\\hline\end{array}$$ Which project has the highest profitability index?

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

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Definitions:

Managerial Accounting

The practice of identifying, measuring, analyzing, and interpreting accounting information to help managers make informed operational decisions.

Financial Accounting

A branch of accounting that focuses on the process of recording, summarizing, and reporting transactional information related to business operations to external parties.

Period Cost

Costs that are not directly tied to the production process and are expensed in the period in which they are incurred, such as administrative expenses.

Product Cost

The total expense incurred in creating a product, including materials, labor, and overhead costs.