The profitability index at 10% per year for a project that has an initial investment of $400,000, an AOC of $80,000 per year, revenue of $170,000 per year, and a salvage value of $60,000 after its 5-year life is closest to: (a) 0.95 (b) 1.06 (c) 1.38 (d) 0.86

The profitability index at 10% per year for a project that has an initial investment of $400,000, an AOC of $80,000 per year, revenue of $170,000 per year, and a salvage value of $60,000 after its 5-year life is closest to: (a) 0.95 (b) 1.06 (c) 1.38 (d) 0.86

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 1P

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Question

The profitability index at 10% per year for a project
that has an initial investment of $400,000, an AOC
of $80,000 per year, revenue of $170,000 per year,
and a salvage value of $60,000 after its 5-year life
is closest to:
(a) 0.95 (b) 1.06 (c) 1.38 (d) 0.86

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