A Machine Will Cost $28 000

question 105

Multiple Choice

A machine will cost $28 000. It is estimated that it will generate $8000 in after-tax savings each year during its five-year life. What is the profitability index assuming a hurdle rate of 10 per cent?

• A) 1.08
• B) 0.92
• C) 1.24
• D) 1.43