Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. suppose your firm is considering investing in proj

Suppose your firm is considering investing in Project W with the cash flows shown in the...

80.2K

Verified Solution

Question

Finance

Suppose your firm is considering investing in Project W with thecash flows shown in the table, that the required rate of return onprojects of this risk class is 10 percent, and that the maximumallowable payback and discounted payback statistics for the projectare 3.5 and 4.5 years, respectively. Use the PI decision toevaluate this project; should it be accepted or rejected?

A. PI = 1.04; reject the project

B. PI = 1.04; accept the project

C. PI = 0.04; reject the project

D. PI = 0.96; reject the project

E. PI = 0.96; accept the project

Project W Time Cash Flow 0 – $85,000 1 $12,000 2 $11,000 3$13,000 4 $21,000 5 $31,000 6 $32,000

Answer & Explanation Solved by verified expert
4.2 Ratings (548 Votes)
PI is Profitability index ie Present value of cash inflows divided by present value of cash out flows PI should be more than 1 in order to be financially viable Calculation of present    See Answer
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Zin AI - Your personal assistant for all your inquiries!
Become a Member

Transcribed Image Text

Suppose your firm is considering investing in Project W with thecash flows shown in the table, that the required rate of return onprojects of this risk class is 10 percent, and that the maximumallowable payback and discounted payback statistics for the projectare 3.5 and 4.5 years, respectively. Use the PI decision toevaluate this project; should it be accepted or rejected?A. PI = 1.04; reject the projectB. PI = 1.04; accept the projectC. PI = 0.04; reject the projectD. PI = 0.96; reject the projectE. PI = 0.96; accept the projectProject W Time Cash Flow 0 – $85,000 1 $12,000 2 $11,000 3$13,000 4 $21,000 5 $31,000 6 $32,000

Other questions asked by students

Q

4 6x 5y 20 4321 654 3 5 41 3 2 2 S ch X

Algebra
Q

Evaluate the integral Integral from 1 divided by 2 to 1 left parenthesis x Superscript negative...

Basic Math
Q

Q4. Human blood is grouped into four types: A, B, AB & O. Type O blood...

Statistics
Q

The Kp for the production of phosgene is 18.0. If one mole each of CO and...

Chemistry
Q

What regions of DNA do eukaryotic activator proteins interact with d promoters e enhancers a...

Biology
Q

The angular width of central maxima in Fraunhoffer diffraction with the light of wavelength 6000...

Physics
Q

Problem 11 Claim Less than 50 of adults would erase all of their personal information...

Statistics
Q

QS 7-15 (Algo) Note receivable interest and maturity LO P4 On December 1, Daw Company...

Accounting
Q

Cost of Goods Sold General, Selling, and Administrative Expenses Income Tax Expense Inventory Net Income...

Accounting
Q

Lisah, Inc., manufactures golf clubs in three models. For the year, the big Bart line...

Accounting
Q

Disposal of Assets A company has an inventory of 3,500 different parts for a line...

Accounting
Q

Kathy is 60 years of age and self-employed. During 2019 she reported $107,000 of revenues...

Accounting