Use the Following Information to Answer the Following Question

question 59

Multiple Choice

Use the following information to answer the following question.
Below are the expected after-tax cash flows for Projects Y and Z.Both projects have an initial cash outlay of $20,000 and a required rate of return of 17%.
Project Y Project Z

-WKW, Inc.is analyzing a project that requires an initial investment of $10,000, followed by cash inflows of $1000 in year 1, $4000 in year 2 and $15,000 in year 3.The cost of capital is 10%.What is the profitability index of the project?

• A)1.04
• B)1.55
• C)1.78
• D)1.97

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Definitions:

General Incorporation Law

State laws that allow businesses to incorporate and outline the process, benefits, and obligations of doing so, typically providing a flexible framework for the establishment and operation of corporations.

Lawyers Incorporate

The process by which lawyers form a corporation, typically to limit personal liability or for tax advantages.

Commerce Clause

A provision in the U.S. Constitution granting Congress the power to regulate interstate and international commerce, serving as a foundational element for federal laws affecting the economy.

State Tax

Taxes imposed by individual states on individuals, businesses, or property to generate revenue for state governments.