(Ignore income taxes in this problem.) The management of Pattee Corporation is c
ID: 2356677 • Letter: #
Question
(Ignore income taxes in this problem.) The management of Pattee Corporation is considering three investment projects-M, N, and O. Project M would require an investment of $25,000, Project N of $67,000, and Project O of $70,000. The present value of the cash inflows would be $28,750 for Project M, $73,700 for Project N, and $79,100 for Project O.
The profitability index of investment project N is closest to:
A. 0.10
B. 0.90
C. 0.09
D. 1.10
Please show me the calculations and how you received the answer, Thank you very much!
Explanation / Answer
TOTAL INVESTMENT=25000+67000+70000=162000 PRESENT VALUE=28750+73700+79100=181550 PI=181550-162000/162000=.1
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