Capital Rationing

question 11

Multiple Choice

Capital rationing. You are considering a project that has an initial cost of $1,200,000. If you take the project, it will produce net cash flows of $300,000 per year for the next six years. If the appropriate discount rate for the project is 10 per cent, what is the profitability index of the project?

• A) 0.09
• B) 1.09
• C) 2.09
• D) 2.18

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Definitions:

Biomedical Intervention

Medical strategies, treatments, or therapies used to treat specific medical conditions.

Drug Therapy

The treatment of disease or disorder through the administration of pharmaceutical drugs, as opposed to surgery, physical therapy, or other methods.

Electroconvulsive Therapy

A mental health treatment where seizures are deliberately caused in individuals using electricity to alleviate psychological conditions.

Depression

A disorder in mental health, identified by enduring feelings of depression or a decreased interest in activities, significantly affecting life on a day-to-day basis.