A Firm Is Reviewing a Project That Has an Initial

Multiple Choice

A firm is reviewing a project that has an initial cost of $71,000. The project will produce annual cash inflows, starting with year 1, of $8,000, $13,400, $18,600, $33,100 and finally in year five, $37,900. What is the profitability index if the discount rate is 11 percent?

A) 0.92
B) 0.98
C) 1.02
D) 1.07
E) 1.12