The Following Details Are Provided by Dopler Company - Calculate the Profitability Index for Project A

question 67

Multiple Choice

The following details are provided by Dopler Company: $$\begin{array} { | l | r | r | r | r | } \hline & \text { Project A } & \text { Project B } & \text { Project C } & \text { Project D } \\\hline \text { Initial investment } & \$ 420,000 & \$ 200,000 & \$ 550,000 & \$ 500,000 \\\hline \text { PV of cash inflows } & \$ 570,000 & \$ 380,000 & \$ 800,000 & \$ 390,000 \\\hline \text { Payback period (years) } & 3.6 & 3.2 & 4.0 & 2.0 \\\hline \text { NPV of project } & \$ 150,000 & \$ 180,000 & \$ 250,000 & ( \$ 110,000 ) \\\hline\end{array}$$
- Calculate the profitability index for Project A.

• A) 0.98
• B) 1.08
• C) 1.36
• D) 1.66

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Definitions:

Decision-making Authorities

Individuals or groups within an organization who have the power to make significant decisions affecting its direction and operations.

Task Significance

The degree to which a job has a substantial impact on the lives or work of other people.

Minimal Impact

The smallest or least significant effect or influence that an action may have on a given system or environment.

Autonomous Decisions

Decisions made independently by an individual or entity, often without the need for external approval or guidance.