Villena Corporation is considering a project that would require an investment of
ID: 2588645 • Letter: V
Question
Villena Corporation is considering a project that would require an investment of $51,000. No other cash outflows would be involved. The present value of the cash inflows would be $58,140. The profitability index of the project is closest to: (Ignore income taxes in this problem.)
0.12
1.14
0.86
0.14
Villena Corporation is considering a project that would require an investment of $51,000. No other cash outflows would be involved. The present value of the cash inflows would be $58,140. The profitability index of the project is closest to: (Ignore income taxes in this problem.)
Explanation / Answer
profitability index=Present value of the cash inflows/intial investment
=(58140/51000)
which is equal to
=1.14(B).
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