The Following Information Is Provided by Chelsa Building Systems Calculate the Profitability Index for Project B

question 1

Essay

The following information is provided by Chelsa Building Systems:
$$\begin{array} { l r r r r } & \text { Project A } & \text { Project B } & \text { Project C } & \text { Project D } \\\text { Initial investment } & \$ 438,000 & \$ 218,000 & \$ 560,000 & \$ 516,000 \\\text { PV of cash inflows } & \$ 582,000 & \$ 388,000 & \$ 800,000 & \$ 394,000 \\\text { Payback period (years) } & 3.6 & 3.2 & 4.0 & 2.0 \\\text { NPV of project } & \$ 144,000 & \$ 170,000 & \$ 240,000 & ( \$ 122,000 )\end{array}$$ Calculate the profitability index for Project B.Show your calculations and round to two decimal places.

---

Definitions:

Productive Systems

Systems designed to enhance efficiency and productivity in the production of goods or delivery of services.

Finished Products

Refer to goods that have completed all stages of production and are ready for sale or distribution to the end-user.

Production Efficiencies

The optimization of processes, resources, and equipment to maximize output while minimizing waste and costs in manufacturing.

Lean Production

A systematic method for waste minimization within a manufacturing system without sacrificing productivity.