A Project Has Been Assigned a Required Annual Accounting Return

Multiple Choice

A project has been assigned a required annual accounting return of 14% and a required discount rate of 9%. The initial cost of the project is $25,000. The project produces annual cash flows of $9,876 a year for three years. What is the profitability index of this project?

A) .92
B) 1.00
C) 1.03
D) 1.09
E) 1.19