Barnacle Bob's Fish and Tackle Shop Is Planning an Expansion

Multiple Choice

Barnacle Bob's Fish and Tackle Shop is planning an expansion. The initial investment is $480,000, and anticipated cash inflows are as listed below. The cost of capital is 12.2%. Based on the profitability index, should Barnacle Bob go ahead with the project? ? $$\begin{array} { | l | l | } \hline \text { Years } & \text { Cash Inflows } \\\hline 1 & \$ 90,000 \\\hline 2 & 105,000 \\\hline 3 & 105,000 \\\hline 4 & 195,000 \\\hline 5 & 195,000 \\\hline 6 & 195,000 \\\hline\end{array}$$

A) No, the profitability index is 2.
B) No, the profitability index is 0.95.
C) Yes, the profitability index is 1.18.
D) Yes, the profitability index is 0.78.