The Following Information Is Provided by Cupola Systems Calculate the Profitability Index for Project A

question 86

Multiple Choice

The following information is provided by Cupola Systems: $$\begin{array} { | l | r | r | r | r | } \hline &{ \text { Project A } } & { \text { Project B } } & \text { Project C } & \text { Project D } \\\hline \text { Initial investment } & \$ 426,000 & \$ 214,000 & \$ 558,000 & \$ 516,000 \\\hline \text { PV of cash inflows } & \$ 584,000 & \$ 382,000 & \$ 806,000 & \$ 390,000 \\\hline \text { Payback period (years) } & 3.6 & 3.2 & 4.0 & 2.0 \\\hline \text { NPV of project } & \$ 158,000 & \$ 168,000 & \$ 248,000 & ( \$ 126,000 ) \\\hline\end{array}$$ Calculate the profitability index for Project A.(Round your answer to two decimal places.)

• A) 1.01
• B) 1.08
• C) 1.37
• D) 1.67

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Definitions:

Null Hypothesis

presents a statement for testing, asserting no association or effect between variables.

Population Mean

The average of a set of data points or values in a population, calculated by summing all the data points and dividing by the number of points.

Sample Mean

The average value calculated from a subset of a population.

Alternative Hypothesis

The hypothesis that proposes there is a statistically significant difference between two variables, contrasted with the null hypothesis.